In a press conference on Wednesday, the Governor of the National Bank of Poland (NBP), Adam Glapinski, shared optimistic projections about the country’s inflation, suggesting that it could drop below 3 percent in the coming months.
Glapinski expressed confidence that by March, the inflation rate would either meet or closely align with the NBP’s target range, describing this prospect as “absolutely amazing.” The NBP’s inflation target is set at 2.5 percent, with a permissible fluctuation of plus or minus 1 percent.
Anticipating a significant decline in inflation in the near future, Glapinski remarked, “In the first quarter of 2024, this drop may be quicker than we foresaw in our projection. Inflation may be reduced in the coming months to even below 3 percent.” He highlighted the remarkable decrease in inflation over the past ten months, dropping from over 18 percent in February 2023 to 6.1 percent in December of the same year.
The recent two-day meeting of the NBP’s Monetary Policy Council concluded on Tuesday, with the decision to maintain the current interest rates unchanged.
While expressing positivity for the immediate future, Glapinski cautioned about a potential temporary spike in inflation in the second half of the year. He attributed this uncertainty to factors such as the value-added tax (VAT) rate on food, emphasizing that inflation forecasts for the upcoming quarters were subject to significant uncertainty.
Glapinski noted that the current zero VAT rate on food had played a crucial role in curbing inflation but warned that this protective measure was set to expire at the end of March. If the VAT on food returns to its previous 5 percent rate, he indicated that consumer inflation (CPI) could grow by almost one percentage point.
The central bank governor also addressed the potential impact of unfreezing energy prices, mentioning that current prices were frozen until mid-2024. Glapinski speculated that if prices of electricity, gas, and heating were gradually unfrozen from July 1, inflation might rise by as much as 4 percentage points. However, he acknowledged the uncertainty surrounding the decisions of the new government in this regard.