Inflation may increase significantly. The MPC presents the scenario

If the higher VAT rate on food is restored and energy prices are increased in the second half of 2024, inflation may increase significantly, it was stated in a statement after the meeting of the Monetary Policy Council (MPC). The Monetary Policy Council assessed that in the first quarter of 2024, the annual CPI growth rate would probably decline significantly, while the decline in core inflation would be slower.

“However, inflation developments in the following quarters are subject to uncertainty, including those related to the impact of fiscal and regulatory policy on price processes, as well as the pace of economic recovery in Poland. If a higher VAT rate on food is reinstated and energy prices are increased, inflation may increase significantly in the second half of 2024. At the same time, the increased dynamics of nominal wages, including in connection with wage increases in the public sector, will contribute to higher demand pressure in the economy,” we read in the statement.

Inflation in Poland. Economic recovery may not be enough

The Monetary Policy Council estimates that the incoming data indicate that despite the observed economic recovery, demand and cost pressure in the Polish economy remain low, which, in the conditions of weakened economic conditions and falling inflationary pressure abroad, contributes to lower domestic inflation.

“In Poland, according to the preliminary estimate of the Central Statistical Office, in 2023 the GDP dynamics amounted to 0.2%, which indicates that in the fourth quarter of 2023 the annual economic growth rate increased, although it remained relatively low. At the same time, the situation on the labor market remains good, including low unemployment. Although the number of working people remains high, employment in the corporate sector in December 2023 was lower than at the beginning of last year,” we read further.

The Council maintained that the current level of NBP interest rates supports the achievement of the inflation target in the medium term and its further decisions will depend on the incoming information regarding the outlook for inflation and economic activity.

“The NBP will continue to take all necessary actions to ensure macroeconomic and financial stability, including, above all, a sustainable return of inflation to the NBP inflation target in the medium term. NBP may intervene on the currency market,” NBP maintained.

“The NBP will continue to take all necessary actions to ensure macroeconomic and financial stability, including, above all, a sustainable return of inflation to the NBP inflation target in the medium term. The National Bank of Poland may intervene on the currency market,” the statement also said.

Interest rates unchanged

Today, the Monetary Policy Council kept the NBP interest rates unchanged (with the main reference rate at 5.75%) – the announcement with the decision was published at 2:59 p.m. The market consensus envisaged leaving interest rates unchanged. On Thursday, February 8 this year, at A press conference of the President of the National Bank of Poland (NBP) and the Chairman of the Monetary Policy Council, Adam Glapiński, is scheduled for 3:00 p.m.