ING economist Adam Antoniak expects the National Bank of Poland (NBP) to maintain its main policy rate at 3.75% during the 2 June meeting and beyond, following a surprising downside in May's Consumer Price Index (CPI) inflation, which remains within the central bank’s target band of 2.5% ± 1 percentage point [1]. The flash estimate for May CPI showed headline inflation easing to 3.1% year-on-year, defying market consensus that anticipated an increase to 3.7% year-on-year [1]. Notably, food prices experienced the sharpest May decline since the early 1990s, contributing to the subdued inflation reading [1].
The recent inflation data has reduced the likelihood of policy tightening in 2024, as broad inflation pressures appear contained and are expected to remain so in the coming months [1]. ING notes that the risk of monetary tightening this year has diminished, with the probability of rates remaining on hold in 2024 and 2027 having increased [1]. In response to rising inflation in March and April, NBP Governor Adam Glapiński had adopted a more hawkish tone, outlining two conditions for a potential rate hike: inflation rising above the upper 3.5% bound of the target and forecasts indicating inflation would remain above this threshold over the medium term [1]. However, the latest CPI data has altered the policy outlook, with the worst-case scenario now delaying inflation exceeding 3.5% until the fourth quarter of 2026, and in a more optimistic scenario, it may not occur this year or next [1].
Additionally, April data revealed a significant slowdown in wage growth, while industrial production and retail sales underperformed expectations, giving policymakers more time to assess the impact of the recent oil shock on domestic inflation and economic growth before considering any policy response [1]. ING’s baseline scenario remains unchanged, expecting policy rates to stay on hold this year and in 2027 [1].
CONCLUSION
The latest data indicates that Poland's inflation remains contained, reducing the risk of imminent monetary tightening. ING and market participants now expect the National Bank of Poland to keep rates steady, with policymakers afforded more time to monitor economic developments before making further decisions.