Are interest rate cuts slowly starting to weigh on the zloty?

The dollar is past its weakest period since 1973, and the Polish zloty has shown tremendous strength this year, despite interest rate cuts by the National Bank of Poland (NBP), which totaled 125 basis points this year. It's clear that the cuts in Poland are driven by policy 'normalization', not an economic slowdown. While we're seeing wage growth slowing and industry still far from significant expansion, overall Poland is holding up well, even compared to the United States. There, the Fed's policy change is caused not only by a slow decline in high 'real' rates, but also by growing concerns about the condition of the labor market, where a number of employment indicators are 'alarming' decision-makers.Moreover, unlike in Poland, interest rate cuts in the US seem almost certain next year. Fed Chairman Powell will be replaced by a new chairman appointed by Trump.

Are US rates far too high?

As is well known, not only Trump but also Treasury Secretary Scott Bessent believe that US rates are far too high, and that the Fed is making a mistake by taking its time easing policy. In a worst-case scenario, this could mean that US rates could fall by as much as 150 basis points (bps) or more next year. The chances of such a scenario currently seem much greater than in Poland, where 2026 will almost certainly bring further cuts by the National Bank of Poland (NBP), but a pace and scale comparable to this year's 125 basis points (bps) seem very, very optimistic. Even if the US introduces draconian tariffs on goods, including Chinese ones, it seems that rates could decline regardless, as the new Federal Reserve's priority will be to drastically reduce debt servicing costs and create a foundation for renewed economic industrialization. Trump recently claimed that current figures show there is no inflation in the US at all. This only shows how much 'tolerance' the Fed, which is playing to the same goal as the president, can have for this, starting from 2026.

Dollar above 4 zlotys again?

A weaker dollar could be a beacon of change overseas, and rate cuts amidst elevated, tariff-fueled inflation could further deepen the currency's devaluation, driving capital towards precious metals, the stock market, and all alternatives to depreciating cash. Nevertheless, we see that recent NBP decisions are slowly opening the door for the USD/PLN exchange rate to re-enter the 3,80 zone. If the Fed were to surprise next year and react with somewhat "sluggish" rate cuts, we could even expect the pair to return above 4. However, the scenario that hinders this scenario will be the US economy, which is slowly and clearly weighed down by the Fed's cautious approach and uncertainty surrounding trade and fiscal policy. Even if the US central bank were to slow down or avoid cuts, the market may see this as an increased risk of recession and not 'reward the dollar' for the Federal Reserve's cautious approachIn short, although USD/PLN has recently risen, there is no prospect of a lasting trend reversal in 2026, although an upward correction in a downward trend may occur. This seems to be limited to the pair's recent 'consolidation' level.

At 11:15 a.m. the dollar is worth 3,68, the pound sterling is worth 3,90, the euro is worth 4,26, and the Swiss franc is worth almost 4,60.

Source: Eryk Szmyd, XTB