Stable Interest Rates Expected in 2024, but EUR/PLN Below 4.15 Could Trigger Cuts

Citi Handlowy Bank analysts anticipate stable interest rates this year, contingent upon the EUR/PLN pair staying above 4.15. A drop below this level would likely prompt a return to interest rate cuts, reflecting concerns about excessive Polish currency appreciation and its impact on exporters' competitiveness. While inflation is projected to temporarily decline in the first quarter before increasing, reaching around 5% y/y by year-end, the forecasted scenario of 8.4% inflation seems unlikely due to the removal of anti-inflation measures. The central bank's potential exchange of EU funds and EUR/USD rate fluctuations are also factors influencing the exchange rate. Currently, the euro trades at PLN 4.32.