MNI NBP WATCH: Rates Seen Held at 5.75% For Remainder Of Year

The National Bank of Poland is expected to hold interest rates this week, and barring surprises the reference rate is seen staying at 5.75% until the end of 2024.

June’s CPI print of 2.6% offers an early taste of the expected rebound of inflation in the coming months, with the NBP acknowledging that core inflation - 3.8% in May - will stay somewhat higher still amid continued service prices growth.

The increase in consumer prices will be seen by Monetary Policy Council member Joanna Tyrowicz, who spoke to MNI late last month, as further evidence that monetary policy has yet to conquer above-target price growth. Further zloty appreciation - one reason why inflation has surprised to the downside in recent months - is unlikely to continue, she said. (See MNI EM INTERVIEW: Too Soon To Declare Inflation Victory - NBP's Tyrowicz)

However, Tyrowicz’s voice is in the minority, with most MPC members expected to echo the views of Ireneusz Dabrowski, who told MNI that while a rate hike cannot be totally ruled out in the remainder of the year, the Bank is on track to hit its inflation target sustainably over the medium term, with a rate cut the “least probable scenario." (See MNI EM INTERVIEW: NBP Likely To Hold Rates In 2024 - Dabrowski)

High wage growth remains a concern, with the NBP forecasting potential GDP growth of 3.0% this year, 3.4% in 2025 and 3.5% in 2026, according to its most recent assessment. In this environment core inflation may remain stickier, Dabrowski said, though he added that monetary policy together with negative output should bring it down gradually.