Central bank expects core inflation to fall in coming months

Poland's core inflation will likely decline in the coming months and quarters and will certainly start decreasing in H2, the governor of the National Bank of Poland (NBP) has said.

Adam Glapiński held a press conference on Thursday following the NBP's Monetary Policy Council's Wednesday decision to keep all interest rates unchanged for the eight month running, with the reference interest rate remaining at 6.75 percent.

According to NBP, Poland's core inflation, which excludes the prices of food and energy, measured 12.3 percent year on year in March 2023, up from 12.0 percent in February.

According to the Central Statistical Office (GUS), prices of consumer goods and services (Consumer Price Index, CPI) increased by 14.7 percent year on year and by 0.7 percent month on month in April 2023.

"Core inflation that has received more attention recently... and remains high in many countries. This applies to the countries of the euro zone, to the USA and especially to the countries of our region. There is nothing unusual about our core inflation," Glapiński said.

"We expect core inflation to fall in the coming months and quarters. It should be decreasing already in H2... to reach a single-digit level by the end of the year," Glapiński said.

He explained that the strong shocks that hit the economy were responsible for maintaining high core inflation. Entrepreneurs included the rising prices of raw materials and energy in the prices of their products and this spread further. In addition, the increase in prices is facilitated by the good situation on the labour market, according to Glapiński.

But, he added, "Poland's demand gap has likely closed and sellers can no longer propose arbitrary prices."

According to him, prospects for the Polish economy for H2 and 2024 are good, with maintained economic growth and positive real wage growth.