Kightley: Inflation below 3% in July, CPI in line with target in the medium term

According to the National Bank of Poland's forecasts, inflation will fall below 3% in July, NBP First Vice President Marta Kightley announced at a parliamentary committee meeting. She added that in the medium term, inflation will be in line with the NBP's target.

"According to forecasts, inflation should fall below 3% this month (compared to 4.1% in June - PAP), i.e. to a level consistent with the National Bank of Poland's (NBP) target. Inflation may rise slightly in the coming quarters if administered electricity prices are unfrozen. Importantly, however, the projection shows that in the medium term, inflation will be consistent with the NBP's target," Kightley said.

"The Council indicates that subsequent decisions will, as before, depend on incoming information. It emphasizes the four most important factors that will influence inflation processes in the medium term: fiscal policy, economic conditions, the situation on the labor market, and energy prices," she added.

According to the National Bank of Poland, a strongly pro-inflationary factor in the domestic economy is loose fiscal policy.

"We don't know the draft budget yet, but according to the European Commission's forecast, with the current legal status, there will be no fiscal tightening next year," Kightley said.

Kightley assessed that the dynamics of economic activity in Poland probably accelerated slightly in the second quarter.

"On the one hand, retail sales data indicate solid consumption growth, but on the other hand, worse data is coming from the industrial sector. Nevertheless, overall, faster GDP growth is expected in 2025 than last year," she pointed out.

Referring to the situation on the labor market, Kightley noted that unemployment in Poland is still low, although employment in the corporate sector has been decreasing for several months.

The key factor for the NBP is the rate of wage growth, which, despite the slowdown, is still elevated.

"Across the economy, annual growth was 10% in the first quarter, slowing to 8.4% in businesses in May after a significant acceleration in April. A further slowdown in wage growth is expected," Kightley noted.

The Vice-President of the National Bank of Poland pointed out that it is not known what the administered electricity prices will be like after the unfreezing, given the uncertainty about global commodity prices due to the unstable situation in the Middle East.

"One thing is certain: the National Bank of Poland will continue to pursue a monetary policy clearly aimed at permanently reducing inflation, because this is the central bank's fundamental obligation towards Poles," she concluded.

The Monetary Policy Council (MPC) cut interest rates by 50 and 25 basis points in May and July, and the NBP reference rate is currently 5.0 percent. (PAP Biznes)

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