EUR/PLN Down 0.35%, Zloty Strengthens as Market Reassesses Poland’s Interest Rate Path EUR/PLN Down 0.35%, Zloty Strengthens as Market Reassesses Poland’s Interest Rate Path

Key Moments:

• The Polish zloty advanced 0.35% against the euro to 4.23650 on Friday, reaching its highest level in a month.
• The National Bank of Poland reduced its base rate by 50 basis points to 5.25% on Wednesday, characterizing the move as an “adjustment.”
• Policymaker Ludwik Kotecki indicated further rate cuts could occur in July and projected two additional 25 basis point reductions in 2025.

Zloty Extends Rally

The Polish zloty continued to move upward on Friday, building on recent positive momentum. The EUR/PLN fell as a result, with the exchange rate slipping by 0.35% to 4.23650. The zloty’s appreciation came after comments from Poland’s central bank governor played down the idea that the recent rate reduction marked the start of a broader monetary easing cycle.

NBP Delivers Expected 50bp Rate Cut, Further Easing Possible

On Wednesday, the National Bank of Poland reduced its benchmark interest rate by 50 basis points to 5.25%, aligning with market expectations. This marked the first rate move since October 2023. The central bank cited a decline in inflation as one of the factors behind its decision, in addition to slowing wage growth and deteriorating economic conditions.

In the press conference held after the rate decision, NBP Governor Adam Glapinski remarked that the adjustment should not be interpreted as an automatic beginning of a cutting cycle. He continued, saying the following: “We do not rule out or prejudge anything.”

It should be noted, however, that on Friday, central banker Ludwik Kotecki signaled the possibility of additional monetary easing as early as July. He also suggested that further rate cuts in 2025 might occur. Each cut would lower the interest rates by 25 basis points, Kotecki added.

Czech Koruna Falls Following Rate Cuts

Wednesday also saw the Czech National Bank (CNB) implement a widely anticipated decrease in its primary interest rate, lowering it by a quarter of a percentage point to 3.50%. This move continues a trend of monetary easing. Despite this latest reduction, the CNB signaled a degree of uncertainty regarding the continuation of this easing cycle. The Czech koruna’s performance has been spotty this week, and on Friday it fell 0.24% against the euro.