Poland: MPC warns of prolonged inflation above target due to energy price unfreezing

The unfreezing of energy prices in the second half of 2025 may extend the period during which inflation remains above the National Bank of Poland’s (NBP) inflation target, according to a statement from the Monetary Policy Council (MPC) following its latest meeting.

The MPC emphasized that inflation is expected to stay significantly above the NBP target in the coming quarters, driven by the effects of prior energy price increases, higher excise tax rates, and rising prices for administered services. Core inflation is also projected to remain elevated, primarily due to high wage dynamics, including public sector salary increases, and persistently strong service price growth.

The Council highlighted uncertainties related to the impact of heightened inflation on inflation expectations and wage pressures, especially given the anticipated economic recovery and Poland’s low unemployment levels. While the current level of interest rates is deemed conducive to achieving the inflation target over the medium term, the MPC noted that further fiscal and regulatory actions would also influence inflation trends.

Looking ahead, the Council expects inflation to return to the NBP target as wage dynamics gradually decline. The NBP reaffirmed its commitment to taking necessary measures to ensure macroeconomic and financial stability, including interventions in the currency market if required, to support the medium-term return of inflation to the target.

Assessing the economic situation in late 2024, the MPC observed an increase in GDP growth during the fourth quarter. Retail sales growth accelerated in November, although industrial and construction output showed negative annual dynamics. Employment in the enterprise sector fell slightly compared to the previous year, but unemployment remained low, and working hours were high. Wage growth continued at a robust pace.

The MPC decided to keep the NBP interest rates unchanged, with the basic reference rate remaining at 5.75%. Future decisions will depend on updated information regarding inflation and economic activity trends.

A press conference featuring Adam Glapiński, President of the NBP and the MPC, is scheduled for Friday, 17 January, at 3:00 PM.

Source: MPC and ISBnews