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NBP: On-Hold Decision Dictated By Elevated Inflation

NBP
PolandCEEMEAEM BulletBulletEmerging Market News

NBP Governor Glapinski says that that the decision to keep rates on hold was dictated by the fact that inflation remains high. Although this largely stems from factors independent from the central bank, the NBP must act to prevent inflation from stabilising at elevated levels.

  • Governor Glapinski lists familiar regulatory factors pushing CPI inflation higher. He says that ongoing economic recovery, high wage pressure and loose fiscal policy further increase the risk of the stabilisation of higher inflation.
  • The Governor discusses the assumptions behind electricity price forecasts. Nothing new here - the central bank works with the current state of knowledge and avoids guesstimating future levels of electricity tariffs.
    • Note that this is one of the reasons why the NBP's forecasts diverge from market consensus. The Governor admits that if electricity tariffs are lowered later this year, this will result in a downward revision to NBP forecasts.
  • The NBP expects headline inflation to be close to +5% Y/Y in 1H25. Core inflation is expected to stay close to +4% Y/Y through the rest of this year.
  • A chart displayed by the Gopvernor suggests that headline inflation is expected to peak at +5.3% Y/Y in 1Q25, then ease off to +4.1% Y/Y in 3Q25 and rebound to +4.8% Y/Y in 4Q25.
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NBP Governor Glapinski says that that the decision to keep rates on hold was dictated by the fact that inflation remains high. Although this largely stems from factors independent from the central bank, the NBP must act to prevent inflation from stabilising at elevated levels.

  • Governor Glapinski lists familiar regulatory factors pushing CPI inflation higher. He says that ongoing economic recovery, high wage pressure and loose fiscal policy further increase the risk of the stabilisation of higher inflation.
  • The Governor discusses the assumptions behind electricity price forecasts. Nothing new here - the central bank works with the current state of knowledge and avoids guesstimating future levels of electricity tariffs.
    • Note that this is one of the reasons why the NBP's forecasts diverge from market consensus. The Governor admits that if electricity tariffs are lowered later this year, this will result in a downward revision to NBP forecasts.
  • The NBP expects headline inflation to be close to +5% Y/Y in 1H25. Core inflation is expected to stay close to +4% Y/Y through the rest of this year.
  • A chart displayed by the Gopvernor suggests that headline inflation is expected to peak at +5.3% Y/Y in 1Q25, then ease off to +4.1% Y/Y in 3Q25 and rebound to +4.8% Y/Y in 4Q25.