(CORRECTED)MNI NBP WATCH: Sticky Inflation Confirms Rate Hold
Poland's central bank expected to keep reference rate at 5.75%, with price pressures building despite weak growth outlook
(Corrects day of rates announcement in first paragraph)
The National Bank of Poland is expected to announce that it is holding key interest rates for the eighth successive meeting on Wednesday, with core inflation still substantially above CPI inflation, which edged slightly higher in May and is likely to strengthen somewhat over the remainder of the year. (See MNI INTERVIEW: NBP Rate Hold "Short-Sighted" - Ex-Governor)
Official statistics show headline inflation was 2.5% in May, up 0.1 percentage point from the previous month despite a 0.2% drop in energy prices over the same period.
While inflation is at the NBP’s target level, the trend is upwards. March CPI was 2.0% - and with core inflation (at 4.1% in April) projected to stay above CPI for several months, the NBP’s reference rate looks set to stay at the 5.75% level set in October 2023. (See MNI INTERVIEW: Polish CenBank Ignores Core Data-MPC's Tyrowicz)
Growth projections released by Statistics Poland on Monday suggest Q1 GDP will expand at a slightly faster rate than previously seen, at 2.0% versus 1.9%, +0.5% qoq - driven mainly by public and private consumption.
NBP Governor Adam Glapinski is expected to reaffirm that despite demand and cost pressures remaining low, low unemployment, high wage growth and elevated service sector prices are contributing to significant uncertainty over the outlook for prices.
He is likely to repeat May’s assertion that a majority of Council members judge that the current level of the NBP interest rates is conducive to meeting the NBP's inflation target in the medium term. (See MNI EM INTERVIEW: NBP Should Hold Rates, Keep Out Of Politics)
Glapinski may also state - as he did in February - that barring any unforeseen events it is possible there will be no rate cuts before the end of this year. (MNI EM NBP WATCH: Rates Held, Signal Of Possible FX Intervention)