MNI INTERVIEW: Too Soon To Say Next NBP Move A Cut - Zarzecki

Poland still faces significant risks of higher inflation, with fiscal expenditure growing fast, Monetary Policy Council member Marcin Zarzecki told MNI, adding that July forecasts will be key for assessing any change in the price outlook following May’s surprisingly weak data. 

While his colleague on the MPC Gabriela Maslowska said on Tuesday that the NBP’s next move could be a rate cut after inflation unexpectedly slowed to 3% in May, Zarzecki said in an interview that his own stance was more cautious.

“The May surprise was largely driven by a one-off monthly drop in food prices of 1.0% month-on-month — that is not a structural disinflationary signal. I am waiting for the NBP’s July projection before reassessing the trend,” he said in written responses to questions. (See MNI INTERVIEW: NBP Hike Risks Grow As War Drags On - Zarzecki)

While Zarzecki said that he understood the reasoning of Maslowska’s comments to Bloomberg, he added that no clear downward trend in inflation is yet visible, with price pressures embedded in the core of the consumption basket.

Public expenditure growing at 5.2% year-on-year is an underappreciated inflation risk, Zarzecki said, adding that the government’s net debt to the domestic banking system hit PLN623 billion in April, an increase of more than PLN136 billion over the year.

FISCAL RISK REAL

Record treasury bond issuance is creating competition for capital, while 10-year bond yields have risen to their highest levels since early 2025 — indicating that the market is pricing fiscal risk as “real and persistent” - with the cumulative budget deficit for January–April materially higher than a year earlier, Zarzecki said.

“This combination means that the path of interest rates needed to sustainably stabilise inflation is higher than it would be under balanced public finances,” he said.

With markets pricing in further ECB rate hikes after June, and expectations of an increase in rates by the Federal Reserve by year’s end, any move to ease Polish monetary policy would run contrary to the external monetary environment, he added. (See MNI INTERVIEW: Pay Gains Key To Price Outlook - NBP's Tyrowicz)

“Poland is economically closely integrated with the euro area, so ECB tightening directly constrains the NBP’s room for independent easing,” he said.

A key unresolved domestic variable is whether or not the Polish government will lift the cap on fuel prices and energy tariffs by during the second half of the year, Zarzecki said.

“If the fuel shield is withdrawn, NBP projections point to inflation rising above 4% — which would immediately shift the balance within the Council.”