MNI NBP WATCH: Rates Held As 2024 Outlook Remains Hawkish

The National Bank of Poland left interest rates untouched on Wednesday, with the reference rate at 5.75%, the lombard rate at 6.25%, the deposit rate at 5.25% and the rediscount rate at 5.80%, despite an expected inflation pickup (See MNI EM NBP WATCH: Rates Seen Held at 5.75% For Remainder Of Year)

CPI price growth is likely to increase "and will be running above" the NBP's inflation target in the coming months, it said in a statement, driven by higher energy prices following the removal of some support measures.

The Monetary Policy Council raised its 2024 inflation projection from the 2.8 – 4.3% seen in March to 3.1 – 4.3%. Next year's projection increased from 2.2 – 5.0% to 3.9 – 6.6%, while inflation in 2026 was seen lower at 1.3 – 4.1%, compared to 1.5 – 4.3%.

"When the effects of the energy price increase fade – amid the current NBP interest rates level – inflation should return to the medium-term NBP target, although the impact of higher energy prices on the inflation expectations is an uncertainty factor,” the NBP said.

"The inflation developments over the medium term will be also affected by the further fiscal and regulatory policy measures, the pace of economic recovery in Poland and the labour market conditions."

As previously, the Council concluded that the current level of interest rates is conducive to meeting the NBP inflation target in the medium term.

Annual GDP growth was seen lower at 2.3 – 3.7% in 2024, against 2.7 – 4.3% in the March 2024 projection, and at 2.8 – 4.8% in 2025, compared to 3.2 – 5.3%.