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The Monetary Policy Council is considering raising interest rates. The dollar is stronger, while the euro is stable.
The MPC speaks openly about a rate hike for the first time. The zloty is getting support, the dollar remains strong
For the first time, a signal has come from the Monetary Policy Council that interest rates could move higher. That is an important shift for the zloty, as in recent days and weeks the domestic currency had been under pressure from sellers.
Ludwik Kotecki, a member of the MPC, said that if the November inflation and GDP projection prepared by the NBP shows a risk that elevated inflation will persist for a longer period, the Council should raise rates later this year. This is the first such clear statement at a time when inflation is moving toward 4%.
Until now, most policymakers had been talking more about cuts than hikes. Kotecki also pointed out that the worst-case scenario would be chasing inflation with rates only once prices have already spiraled out of control. In his view, it would be better to act in advance, before higher energy costs feed through into other prices.
The market has already started pricing in a more hawkish scenario. FRA contracts now imply a 100 bp. increase in rates over the next two or three quarters and a move to 5% within 12 months. Some economists still believe, however, that there will be no hikes at the NBP, so the debate over the next move is only just getting started.
For people exchanging money, the key point is that any tightening of monetary policy could strengthen the zloty. For now, however, the currency remains influenced by the global strength of the dollar and higher rates in the U.S. and the euro area. On Monday morning, the euro was trading at 4,3770 zł, more than half a grosz higher than on Friday.
The market is also showing a stronger dollar. The USD/PLN rate stood at 3,8447 zł in the morning, 0,7 grosz higher than before the weekend. On Thursday it reached 3,8620 zł, the highest since April 2025. The Swiss franc cost 4,6316 zł, while the pound sterling was close to 5,10 zł, 1,6 grosz higher than on Friday evening.
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