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BNY warns euro strength could complicate Poland rate cuts

BNY says Poland’s import prices rose materially between March and May even without further EUR/PLN strength, leaving policy pricing vulnerable to a return above 4%.

Reported · Written up by our desk · Central Banks

BNY’s Geoff Yu argues that euro strength is increasing Poland’s import price pass-through risk, with gains in EUR/PLN feeding into higher import prices even if the Monetary Policy Council holds rates steady.

According to FXStreet, the NBP is currently guided toward no change in interest rates for the rest of the year, but market pricing suggests rates may need to move back above 4%, increasing the risk that expectations for future cuts become harder to sustain.

Yu also highlights a stronger inflation risk dynamic tied to supply-chain linkages across Europe and says the latest data show import prices increased materially between March and May despite no significant upward moves in EUR/PLN.

The outlook, FXStreet reports, could hinge heavily on the ECB, and Yu suggests taking Polish rate cuts off the agenda entirely, while positioning for greater vigilance from the NBP and Riksbank as EUR/PLN upside risks persist into Q3.

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