Poland: Easing Inflation Trends Reinforce Expectations for a March Rate Cut

Author: Łukasz Zembik

Date: 20 February 2026

Key Highlights

• January data supports expectations for a 25 basis point rate cut in March.
• Industrial production declined significantly, with construction down 12.8% year-on-year.
• Producer prices fell by 2.6% year-on-year, indicating deepening deflation.
• Wage growth shows early signs of moderation, contributing to a softer inflation environment.
• The EUR/PLN exchange rate approaches multi-month highs, suggesting potential further upside risk.
• Market expectations indicate a sustained easing cycle, with policy rates potentially falling to 3.5% within six months.

Industrial Production and Economic Trends

The latest macroeconomic data from Poland has reinforced the case for a potential interest rate cut by 25 basis points at the upcoming Monetary Policy Council meeting in March. The industrial output figures for January were disappointing, with a notable decline in the construction sector, which contracted by 12.8% year-on-year. This downturn was attributed in part to unusually low temperatures, but the weakness was widespread, affecting 21 out of 34 monitored sectors. This trend indicates a broader decline in industrial production rather than just a moderation in growth rates following the post-pandemic rebound.

Producer Prices and Inflation

Producer prices have also shown a significant decline, falling by 2.6% year-on-year in January, which is the steepest drop since December 2024. This decline suggests subdued cost pressures in the manufacturing sector, reducing the likelihood of price increases being passed on to consumers in the near future. The data supports the narrative of persistent disinflationary forces within the economy.

Labour Market Dynamics

There are early signs of cooling in the labor market, with monthly wage growth showing a slight slowdown. This moderation in wage dynamics, combined with weak industrial activity and falling producer prices, paints a picture of a softening inflation environment in Poland.

Monetary Policy Implications

Given the current economic indicators, a rate cut in March appears increasingly likely. If the National Bank of Poland proceeds with this easing, the Polish zloty may continue to weaken against other regional currencies. However, the relative performance of the zloty will also depend on monetary policy developments in other countries.

Technical Analysis of EUR/PLN

The EUR/PLN exchange rate is currently trading around 4.2240, nearing highs recorded in late 2025 and early 2026. A potential head and shoulders pattern is forming, which could signal further upside for the pair in the medium term. Market expectations reflected in the PLN FRA (Forward Rate Agreement) rates suggest that investors anticipate a series of rate cuts, indicating a broader consensus on continued monetary easing in Poland.

Conclusion

Overall, the economic landscape in Poland is shifting towards a more accommodative monetary policy, driven by moderating inflation pressures and weaker macroeconomic conditions. The market's forward pricing reflects growing confidence in a sustained easing cycle ahead.