Polish central bank keeps rates stable as it eyes rising inflation
Recasts with new inflation forecasts
WARSAW, July 3 (Reuters) -Inflation in Poland may exceed the central bank's target range in 2024 before likely rising further in 2025, the bank's latest forecasts showed on Wednesday, after it opted to remain in wait-and-see mode on rates for the ninth month in a row.
The National Bank of Poland (NBP) has kept its main interest rate at 5.75% in anticipation of an acceleration in inflation in the months ahead, even as policymakers elsewhere in the region have signalled that the cost of credit will continue to fall, albeit at a slower pace.
The NBP sees inflation at 3.1-4.3% in 2024, 3.9-6.6% in 2025 and 1.3-4.1% in 2026, it said in a statement. In its last set of forecasts in March, it forecast inflation of 2.8-4.3% in 2024 and 2.2-5.0% in 2025. It targets inflation of 2.5% plus or minus one percentage point.
"In the coming quarters, the consumer price growth is likely to increase and will be running above the NBP inflation target, which will be driven by the raised energy prices," the bank said.
"When the effects of the energy price increase fade – amid the current NBP interest rates level – inflation should return to the medium-term NBP target, although the impact of higher energy prices on the inflation expectations is an uncertainty factor."
Central European policymakers have been put on alert by double-digit wage rises far outpacing the European Union average.
In Poland, the government also raised the value added tax on food staples from zero to 5% in April and raised an energy price cap for households this month.
All analysts in a Reuters poll had expected rates to remain unchanged on Wednesday.
"The first cuts (will be) in Q2, 2025, when inflation is on a downward trajectory," mBank analysts said in a post on social media platform X.
"Until then, due to the emphasis on risks related to the unknown impact of energy price increases on inflation expectations, the rates will remain unchanged."
Reporting by Alan Charlish, Pawel Florkiewicz, Anna Koper, Barbara Erling editing by Tomasz Janowski and Sharon Singleton
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