MNI NBP WATCH: Rates Held Despite High Core, Better Growth

The National Bank of Poland left interest rates unchanged for a fifth consecutive meeting on Wednesday, with inflation seen lower this year than previously projected, even as growth was expected to improve. (See MNI NBP WATCH: Rates Likely On Hold But Focus On Projections)

The NBP's reference rate was held at 5.75% after CPI inflation fell to 3.9% in January from 6.2% in December 2023, and with the latest official projections likely inflation of 2.8–4.3% in 2024 (versus 3.2 – 6.2% seen in November 2023), 2.2–5.0% in 2025 ( 2.2 – 5.3%), and 1.5–4.3% in 2026

Projected annual GDP growth was revised upwards, to likely ranges from 2.7–4.3% this year (versus 1.9 – 3.8% in the November exercise), 3.2–5.3% in 2025 and 2.0 – 4.5% in 2026. But core inflation - currently in excess of 6% is set to remain above CPI in the coming months, and its decline will be slower. (see MNI INTERVIEW: Polish CenBank Ignores Core Data-MPC's Tyrowicz)

"In the Council’s assessment, incoming data indicate that despite the observed economic recovery, demand and cost pressures in the Polish economy remain low, which amidst weakened economic conditions and falling inflation pressure abroad supports lower domestic inflation," an NBP statement said. "As a result, it is expected that in the coming months annual CPI growth will run at the level consistent with the NBP inflation target."

The NBP said there was still “substantial uncertainty” around both sets of projections, related largely to fiscal policy and nominal wage increases. Nevertheless, the Council said, the current level of the NBP interest rates “is conducive to meeting the NBP inflation target in the medium term.”