NBP Preview: Rates On Hold, Rhetoric Turning Neutral/Hawkish

We expect Poland's Monetary Policy Council to keep policy rates unchanged amid elevated global uncertainty and a potential energy shock that is still unfolding. Although the initial pass-through from higher oil prices to domestic fuel prices - and hence CPI inflation - in March was weaker than anticipated, the inflation outlook has nonetheless deteriorated. In this environment, any discussion of further monetary easing is firmly off the agenda. Our updated CPI forecasts assume average CPI in 2026 to be 3.2% vs 2.0% we saw before the outset of the Iran war, and the March NBP projection at an average of 2.3%.

In the face of reports of a ceasefire and planned peace talks, there remains a possibility that the shock could prove temporary and largely supply‐side in nature. As opposed to the 2019-2023 inflation spike, which was caused by supply and demand shocks, and policy mistakes, which caused a significant inflation spike, de-anchoring inflation expectations and required a policy response.

The Polish central bank must remain on high alert, and its communication is likely to adopt a more c autious tone in March. Still, in our view, the probability of rate hikes is low and the MPC is set to signal an upside risk to CPI and a downside risk to GDP growth. Policymakers will closely monitor incoming inflation data for signs of broader price pressures in goods and services not directly related to fuel costs, as well as potential second‐round effects that could warrant an adjustment to monetary policy.

If the Middle East conflict and oil prices have peaked, there is no case for raising interest rates in the coming quarters. This is particularly the case given fiscal intervention in the petroleum market: temporary cuts to excise duty and VAT, which should help smooth the peak in retail petrol and diesel prices.

Our baseline scenario is that the National Bank of Poland's rates will remain at their current levels, with the main policy rate at 3.75%, through the end of the year. However, we expect more balanced rhetoric as opposed to dovish comments presented before the Iran war. Still, the governor should rather present a balanced view, presenting risk to CPI on the upside, but to GDP growth to the downside.

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