MNI INTERVIEW: Jury Out On 2026 Inflation - NBP's Tyrowicz

Declining Polish inflation despite robust economic expansion is good news, but should not yet be taken as a trend, Monetary Policy Council member Joanna Tyrowicz policymaker told MNI, though she noted that cheap Chinese imports could further slow the pace of price increases next year.

Tyrowicz said she could not understand how the National Bank of Poland can maintain it is not in an easing cycle and continue to emphasise upside risks to prices despite six consecutive rate cuts this year, including December's 0.25 percentage point reduction to 4%. (See MNI EM NBP WATCH: Rate Cut 25Bps To 4% On Lower Inflation Data)

“I do not understand this communication, and it does seem at odds with our mandate,” she said in an interview, adding that "the jury is still out" on whether a further adjustment to the monetary policy stance is warranted.

While experimental data from Statistics Poland indicates that the most rapid falls in inflation have been seen in sectors with the biggest increase in sales, Tyrowicz emphasised that it is still to be seen how much of this responded to attempts to boost end-of-year sales, and that there is a risk of going “back to higher price dynamics in a short space of time.”

While headline inflation has fallen to 2.5% in November from 4.9% in March, Tyrowicz noted that services inflation is currently north of 5.5%, compared to an historical average of around 2%, while service sector wages are still growing more rapidly this year than in the previous year, despite less competition for workers between the manufacturing and service sectors. (See MNI EM INTERVIEW: Pay Too High For NBP Target - PBR's Jankowiak)

Poland risks finding itself in a similar situation to 2019, when headline inflation was below 3.5% before the economy gradually overheated, Tyrowicz said.

“Normally, prices grow at this time of the year, and they actually declined month-on-month. That’s nice for the reading of CPI inflation, but it’s not something you can base your policy on,” she said.

CHINA DISINFLATION

Overall, roughly twice as many prices are currently growing at rates five to ten times the long-term average, while relatively few are growing at a range of zero to 1.5 times the long-term average. 

“This suggests that we are still seriously off-balance, and it was even before loosening of the monetary policy stance. Wage growth is still strong. In other words, the improvement is very gradual and those price-setting processes need to be stabilised before we can consider our economy prepared for new shocks.”

Still, trade with China could push inflation down further next year, she said, though she noted that this may prove to be a transitory phenomenon which monetary policy should look through.

“For trade with China to generate deflation in at least some goods we would need to see prices of Chinese exports decline in 2026 relative to 2025. If that is the case, it may lead to reassessing the policy stance.”

FISCAL COMMENTARY

Tyrowicz was also critical of recent comments by NBP Governor Adam Glapinski, who pointed to upside inflation risks posed by expansionary fiscal policy and increased state borrowing. These go beyond the central bank’s mandate, she said.

“We may want to compare our focus to the macroeconomic assumptions of the budget, but that should be as far as it goes,” she said.

Similarly, a recent public spat between the governor and the NBP’s Management Board - resulting in the publication of an admonitory letter signed by seven out of 10 MPC members - should be seen as politically-motivated in-fighting, she said.

“The conflict was about things that matter to politicians; to have influence over resources to be allocated to influence political agenda. None of it was about an independent and credible central bank.”