NBP Minutes Highlights: Majority Stays Accommodative, But Inflation Risks Concerning

• Council majority believed rates should be kept unchanged in the light of the sources and expected temporary nature of CPI exceeding the NBP target, and due to uncertainties weighing on the scale and strength of the recovery
• Certain members advocated a rate hike, arguing it could reduce a risk of CPI staying above 2.5% over the entire NBP forecast horizon and exceeding the upper limit of the MPC tolerance band in some quarters

Inflation:

• Council majority agreed annual CPI would stay above the upper end of the inflation target range in the coming months due to factors independent of the monetary policy and then subside in 2022
• Some MPC members stressed, however, the July projection shows a higher inflation path than the previous one and that demand pressure could rise in the coming quarters if economic situation remains favorable and deferred demand is gradually realized, leading to elevated inflation also next year

GDP:

• While the council took note of very favorable prospects for the economy suggested by the newest NBP projection, a council majority pointed to uncertainties tied to the fourth Covid-19 wave
• A minority expressed confidence in economic rebound, taking into account good situation in the industry, soaring exports and large household savings – playing down the impact of a 4th wave.

Labour Market:

• Situation on the Polish labor market remains good, especially after lifting of restrictions in May. Some council members indicated the strong labor market translates into wage pressure, but a majority played down the wage pressure, saying it's not "excessive" and does not exceed labor productivity gains.