MNI NBP WATCH: Dovish Signals Point To Rate Cut This Year

The National Bank of Poland left key interest rates unchanged at 5.75% on Wednesday, but changed its guidance on the duration of above-target inflation to indicate a more dovish outlook. (See MNI EM NBP WATCH: Data Complicates Governor's Hawkish Case)

Having said in March that it expects inflation to remain “markedly” above target for the remainder of 2025, the Monetary Policy Council expects it do so only “in the coming months, driven by the effects of the alreadypintroduced increases in energy prices, as well as by the rises in excise duties and administered services prices.”

Wage growth continues to run at a "high level," the MPC said, but despite the expectation that core inflation will “probably continue to be elevated,” incoming enterprise sector data point to a “lowering” of the pace of wage hikes, although some uncertainty persists.

While regulated energy prices will increase in the second half of the year, incoming information, including below-expectations Q1 2025 inflation data, now suggests that inflation in subsequent quarters may also be lower than previously expected.

"The impact of elevated inflation on inflation expectations and wage pressure – especially amid a rising demand and low unemployment – remains an uncertainty factor. Inflation developments over the medium term will be affected by the further fiscal and regulatory policy measures," the NBP said in a statement.

Attention now turns to Thursday’s press conference, where NBP Governor Adam Glapinski may well sound less hawkish than he has for many months, while continuing to highlight presence of domestic and global uncertainties, notably from trade.