Inflation to rise again. NBP’s worrying forecasts

The National Bank of Poland (NBP) published its latest inflation report today. According to the July projection by the central bank’s economists, average consumer inflation (CPI) in Poland will amount to 3.7% this year. Next year, it is to increase to 5.2%, while in 2026 it will decrease to 2.7%. In the last quarter of this year, the CPI is to reach the inflation target of 2.5%.

Inflation higher than forecast

Let us recall that the NBP publishes the inflation projection three times a year – in March, July and November. This projection is of key importance for the Monetary Policy Council (MPC) decisions on interest rates.

The central bank assumes that inflation in 2025 will be higher than forecast in the March projection. NBP explains that “information and data that came in after the March projection was closed contributed to a lower path of the forecasted economic growth rate and an upward revision of the CPI inflation forecast for 2024-2025”. As the central bank points out, expectations for these variables in 2026 have not changed significantly.

The NBP emphasises that the most important factor increasing the CPI inflation path compared to the previous projection are legislative changes that were introduced after the March projection was closed, influencing higher dynamics of energy and food prices.

– As a result, the dynamics of electricity, natural gas and district heating prices in 2024-2025 are at a higher level than in the previous forecasting round. At the same time, food prices are being raised by the 5% VAT rate reinstated on basic food products from April 1 this year – informs the central bank.

There is no point in counting on a reduction in interest rates

The return of CPI inflation to the NBP inflation target (2.5%) in 2026 was discussed during yesterday’s press conference by the head of the central bank, Adam Glapiński. This will happen – as he explained – if the MPC decides to maintain interest rates at the current level. The NBP president left no doubt that for now there is no point in counting on interest rate cuts.

– It is already obvious now – we can forget about reducing interest rates when inflation is growing significantly – from 2.5 to almost 5 percent. Such an opportunity (to reduce interest rates – ed.) may appear in 2026 at the earliest, when inflation starts to fall – said Glapinski.