MNI NBP WATCH: Rates Hold Amid Energy, Wage, Food Price Rises
MNI (LONDON) - The National Bank of Poland left key interest rates unchanged on Wednesday, noting that strong wage growth, energy price hikes and higher food and drinks prices had contributed to successive increases in inflation. (See MNI NBP WATCH: Rates Hold Expected, But Easing Debate Nears)
For the 11th meeting in a row the reference rate was held at 5.75%, with the Monetary Policy Council repeating that that the current level of the interest rates is conducive to meeting the inflation target.
“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,” the Bank said in a statement.
Consumer price growth is also being constrained by the appreciation of the zloty exchange rate, which is "consistent with the fundamentals” of the economy, the Council noted.
“However, price pressure in the domestic economy is stimulated by a marked wage growth, stemming i.a. from wage increases in the public sector. Alongside that, the rise in prices of energy carriers increases inflation significantly. This factor will continue to affect the annual inflation rate in the coming quarters,” the MPC said.
“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.”
Annual inflation rose 0.1 percentage point in August to 4.3%, according to Statistics Poland flash estimates, but, the NBP said, core inflation was “relatively stable,” while in July the annual fall in producer prices remained “significant."
While Poland’s economy expanded by 3.2% YoY in Q2 2024, thanks largely to increased consumption demand, weakened external demand conditions mean recovery will continue only gradually, further curbing inflationary pressures, the Bank said.
NBP Governor Adam Glapinski will make additional remarks at a press conference on Thursday.