Poland’s inflation to reach 4.9 % this year: Central Bank prognosis

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Inflation in Poland will increase to 4.9 percent in 2021 but GDP will rise to 5.3 percent, according to the National Bank of Poland’s (NBP) November forecast.

According to the flash estimate, CPI in September rose to 5.8% YoY from 5.5% in August (consensus at 5.5-5.6%YoY, ING 5.6%YoY). The strong price pressure in Poland is due to the continued high pace of fuel prices (28.6% YoY) and further increases in food prices (to 4.4% from 3.9% in August). Energy prices were 7.2% up, and should accelerate further due to the already announced natural gas price hike, starting from October.

In its monthly Inflation Report, the NBP also said inflation will grow even more, to 5.8 percent, in 2022 and will decline to 3.6 percent in 2023. GDP growth will remain strong, but will decrease compared to 2021’s 5.3 percent, and will reach 4.9 percent in both 2022 and 2023, the NBP said.

Last week, the NBP’s Monetary Policy Council raised the reference interest rate by 0.75 percentage points, exceeding market expectations, to 1.25 percent. A month earlier, the Council reversed its low-interest-rate policy with an increase of 0.4 percent in the main interest rate, the first hike in years.

The official CPI inflation reading by the Central Statistical Office for September was 5.9 %, more than double the NBP’s official target of 2.5 percent. But in a flash estimate for October, the inflation was seen even higher, at 6.8 percent.

As it should reduce the propensity to tighten monetary policy, weakening of zloty in November is possible. Admittedly, the zloty gained on Friday, as foreign investors believe that the proposal (rejected) of a 190bp rate hike at the September MPC meeting means that the NBP will follow the Czech CNB (which raised rates by 0.75pp yesterday). In our view, however, there could be a disappointment – MPC can underdeliver with the scale of tightening (we see a hike of about 15bp).


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