Eastern European Currency Resilience: How Central Bank Divergence Shapes the Złoty and Forint

In the wake of global inflationary pressures and geopolitical uncertainties, Eastern European currencies have shown unexpected resilience. The Polish złoty (PLN) and Hungarian forint (HUF) stand out as case studies in how divergent central bank strategies can influence exchange rate stability and investor confidence. As the National Bank of Poland (NBP) and the Hungarian National Bank (MNB) navigate inflation, fiscal policy, and external shocks, their contrasting approaches reveal critical lessons for investors.

Policy Divergence: Tightening vs. Prudent Patience

The NBP has maintained a 5.75% key interest rate since early 2025, resisting calls for rate cuts despite a gradual economic recovery. Governor Adam Glapinski has emphasized that inflation, currently at 5% year-on-year, is expected to remain above the 2.5% target until 2027. The bank's strategy hinges on a “flexible” approach, balancing price stability with support for sustainable growth. Open market operations and reserve requirements are tools to manage liquidity, while fiscal policy—critically, high public spending—adds complexity to inflation dynamics.

In contrast, the MNB has kept its key rate at 6.50% since May 2025, with a hawkish stance reinforced by its June 2025 decision. The forint faces headwinds from strong service-sector inflation (5.0% core CPI) and government-imposed price controls on essentials, which the MNB warns could distort market signals. Despite a 25-basis-point cut in June 2025, the MNB remains cautious, projecting inflation to fall to 3% only by 2027. Its policy is defined by “patient vigilance,” prioritizing long-term stability over short-term gains.

Currency Resilience: Why the Złoty and Forint Are Holding Ground

The złoty and forint have outperformed many emerging-market peers in 2025, a testament to their central banks' credibility and structural advantages. The NBP's focus on inflation targeting has bolstered the złoty's appeal, with the currency trading within a 4.30–4.45 PLN/EUR range despite global volatility. Similarly, the forint has remained remarkably stable against the euro, hovering near 400 HUF/EUR, despite Hungary's reliance on price controls and fiscal interventions.

Key factors underpinning this resilience include:
1. Strong Foreign Exchange Reserves: Both countries have bolstered reserves to cushion against external shocks. Hungary's current account surplus of EUR 1.05 billion in March 2025, for example, reflects robust export performance.
2. Flexible Exchange Rate Regimes: The NBP and MNB have avoided rigid currency pegs, allowing markets to absorb shocks while maintaining intervention tools for stability.
3. Dovish Outlooks for 2026: While 2025 policies remain hawkish, both banks have signaled potential rate cuts in 2026 if inflation moderates—a forward guidance that has tempered speculative pressure.

Risks and Opportunities for Investors

For investors, the divergence in policy trajectories offers both risks and opportunities. The złoty's resilience may attract those seeking exposure to Eastern Europe's growth story, particularly in sectors like manufacturing and technology. However, Poland's delayed inflation normalization and high wage growth could reintroduce volatility.

The forint, meanwhile, presents a paradox: its stability is underpinned by aggressive price controls, which risk distorting economic signals. While the MNB's hawkish stance has preserved credibility, investors must weigh the long-term costs of market interventions.

Investment Strategy: Hedging and Sectoral Bets

1. Currency Hedging: Investors in Eastern Europe should consider hedging against zloty and forint depreciation via forward contracts or currency ETFs, given the NBP and MNB's cautious stance.
2. Sectoral Exposure: Poland's tech and automotive sectors, supported by NBP liquidity tools, offer growth potential. In Hungary, the energy and agriculture sectors may benefit from the MNB's inflation-targeting framework.
3. Long-Term Diversification: Given the projected 2027 inflation normalization in both countries, long-term investors could overweight equities in domestic firms with pricing power.

Conclusion: Policy Divergence as a Double-Edged Sword

The NBP and MNB's contrasting approaches highlight the delicate balance between inflation control and economic growth. While the złoty and forint have demonstrated resilience, their futures hinge on the success of structural reforms and global stability. For now, these currencies remain compelling cases of how monetary policy divergence can shape emerging-market outcomes—and offer a roadmap for investors navigating a fragmented post-pandemic world.