NBP Revises '25 CPI Outlook Significantly Higher, Focus Turns To Official Commentary

The National Bank of Poland (NBP) released an updated set of macroeconomic forecasts alongside the expected decision to keep interest rates on hold on Wednesday. The mid-points of the CPI projection for 2024 was revised marginally higher (to +3.1% Y/Y from +3.0% in the forecast from March), but the biggest surprise was the significant revision to the 2025 forecast mid-point (changed to +5.1% Y/Y from +3.6%). Still, the mid-point of the forecast for 2026 was revised slightly lower (to +2.7% Y/Y from +2.9%), suggesting that the surge in inflation expected next year is seen as temporary. We summarise snap reactions from several local sell-side desks below, but it should be noted that further clarity will be provided by Governor Glapinski's press conference today (14:00BST/15:00CEST), as well as the presentation of the new forecasts by the central bank's senior staffers on Friday (09:00BST/10:00CEST)

• mBank note that the central bank expects inflation to be elevated in 2025, but this is not the horizon of monetary policy at this point. The NBP set their sights on 2026 and the outlook for this year looks better. According to mBank, rate cuts may come in 2Q2025, when inflation will be on a downward trajectory.
• Pekao believe that the new projections push back the prospect of rate cuts instead of bringing it closer. They argue that the return to the target has moved further away (to 1H2026 from end-2025) and note that they expect next editions of the inflation report to show an even later return to the target. They expect inflation to stabilise around +4.0% Y/Y due to still robust GDP growth and heightened wage pressures.
  
• PKO write that the reasons behind the lower expected inflation were (1) a lower starting point for inflation, (2) only partial unfreezing of energy prices, and (3) a weaker momentum of core prices. They suspect that the new projection does not account for the revised energy tariffs (the cut-off date was June 14).
  
• The Polish Economic Institute note that the revised inflation outlook for 2024 is a function of a positive surprise in 1H2024 and more clarity on the pace of unfreezing energy prices. They expect the NBP to stand pat on rates in the coming months, but not due to the partial withdrawal of energy price caps. Rather, they think that elevated core inflation (incl. in the services sector) is the main source of concern now.