ING economists Rafal Benecki and Adam Antoniak expect the National Bank of Poland (NBP) to keep policy rates unchanged at 3.75% in coming months, despite higher April Consumer Price Index (CPI) and stronger March activity data. They see a progressively more hawkish communication stance, with July’s updated NBP projections flagged as a potential turning point for reassessing inflation and the medium-term monetary policy path.
"April CPI inflation surprised to the upside, rising to 3.2% year-on-year, most likely driven by stronger core inflation. While the activity data for March were also stronger than expected, but presumably due to companies restocking before expected price rises. While this reinforces the case for vigilance, we believe it is still insufficient to trigger an immediate policy response."
"As a result, the MPC is likely to keep interest rates unchanged at the May meeting, opting to gather more evidence on the impact of elevated oil prices on inflation dynamics and economic growth. But, we expect the central bank’s communication to gradually adopt a more hawkish tone."
"That said, the tone of communication is likely to shift. Rate setters may increasingly emphasise upside inflation risks and signal a readiness to act if conditions warrant. In our view, the MPC will seek to underline that policy is not on hold indefinitely and that tightening remains an option should inflation pressures broaden."
"Our baseline scenario remains one of stable policy rates in the near term. The MPC is reluctant to respond mechanically to a supply-driven shock, particularly given the limited effectiveness of rate hikes in countering higher energy prices and the potential costs to economic activity. However, if incoming data were to point to rising inflation expectations or the emergence of second-round effects, the Council could be forced to reconsider its stance and move towards tightening."
"We therefore expect the Monetary Policy Council (MPC) to keep rates on hold at 3.75% in the coming months."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)