MNI NBP WATCH: Rates Left Unchanged, Uncertainty "Substantial"

The National Bank of Poland left key interest rates unchanged for an eighth successive meeting on Wednesday, with demand and cost pressure still low and CPI trending towards target, but with core inflation expected to remain elevated due to continued service sector price growth.

The NBP's reference rate remains at 5.75%, a level it said was "conducive" to meeting its inflation target in the medium term. (See MNI NBP WATCH: Sticky Inflation Confirms Rate Hold).

In a statement, the NBP pointed to Statistics Poland's flash estimate that annual CPI inflation was 2.5% last month, compared with 2.4% in April, as energy prices, including fuels, picked up steam,

"In turn, annual growth in prices of food and non-alcoholic beverages declined slightly. Considering the Statistics Poland data, it can be estimated that inflation net of food and energy prices decreased again in May 2024," the NBP said.

As in previous months the Monetary Policy Committee said there was "substantial uncertainty" over the future course of inflation, with the impact of fiscal and regulatory policies on price developments, including on inflation expectations, still to be determined.

Poland's economy is expected to grow at a rate of 2% this year, the NBP said, though some doubts remain, with medium-term demand pressures seen gaining momentum due to "marked" wage growth stemming from recent public sector pay hikes.