CEE FX: Hawkish holds and cautious easing path – Societe Generale

Societe Generale strategists expect a hawkish hold from Poland’s National Bank of Poland (NBP) at 3.75% and no change from Romania’s central bank NBR at 6.50%, as inflation and political uncertainty constrain policy flexibility. In Poland, firmer inflation keeps the prospect of further tightening alive, while in Romania, elevated price pressures and uncertainty over government formation argue for caution, with the next rate cut seen only in 1Q27 if inflation declines and political stability returns.

NBP, NBR and regional currency pressures

"In CEE, we anticipate a hawkish hold by the NBP at 3.75% on Wednesday. The case for tighter policy has strengthened after inflation quickened to 4.0% in September, driven by higher fuel prices. Policymakers have increasingly stressed the importance to prevent inflation from becoming entrenched."

"However, we expect the MPC to bide its time until the November staff projections are published before raising rates by 25bp. Another 25bp could be added in January. A hawkish hold may provide only limited support for the PLN as money markets already price ample tightening"

"In Romania, we expect the central bank to keep rates unchanged at 6.50% on Thursday. Inflation is gradually easing but political uncertainty, FX volatility and still-elevated price pressures limit the scope for cuts."

"With government formation still uncertain, policymakers are likely to remain cautious and signal patience. Our call is for the next cut in 1Q27 provided inflation continues to decline and a stable government is formed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)