MNI NBP WATCH: June CPI Rise Makes July Hold More Likely

June’s upside inflation surprise and a preference for caution means the National Bank of Poland could rates leave untouched on Wednesday, though the continued improvement in the overall price outlook means easing is likely to resume in the autumn. (See MNI NBP WATCH: Rates Held; Inflation, Growth Outlooks Revised)

Monetary Council Members were almost unanimous in voting to keep the reference rate at 5.25% in June, following what Governor Adam Glapinski called the “significant adjustment” of May’s half-point cut, with inflation at 4.0% amid weaker - albeit still elevated - wage pressures.

Confirmation that the government will extend the freeze on household electricity prices for the remainder of the year, coupled with the continued decline of fuel prices, suggest the disinflation process is set to continue throughout the summer.

While there remains an outside chance of a cut this month, flash estimates suggesting CPI inflation rose by 4.1% in June mean the MPC might wait until its next meeting in September.

Glapinski has tended to place greater emphasis on upside risks to prices such as the improving growth outlook and assumed higher fiscal spending in post-meeting press conferences.

Still, July’s fresh macroeconomic projections may provide sufficient evidence inflation is closing in gradually on the NBP’s target to warrant a slightly more dovish tone to central bank and individual MPC members’ communications.