Poland's central bank says inflation will remain high

Rafał Guz/PAP

Inflation in Poland will stay at record-high levels throughout 2022 amid global supply chain bottlenecks and economic shocks caused by Russia's invasion of Ukraine, the National Bank of Poland's rate-setting body has warned.

The Monetary Policy Council (RPP) said in a Tuesday statement, following a 75 basis-point interest rate hike, that "there is a 50-percent probability that the annual price growth will be in the range of 9.3–12.2 percent in 2022."

This compares to the RPP's November projection of a 5.1-6.5-percent Consumer Price Index (CPI) range this year.

In 2023, the CPI is to fall in the range of 7-11 percent, followed by a 2.8-5.7 percent estimate for 2024.

The RPP also downgraded the country's GDP growth for 2022 to 3.4-5.3 percent, with a 50-percent probability, against 3.8-5.9 percent expected in November.

In 2023, the GDP is expected to grow between 1.9 and 4.1 percent and in 2024 between 1.4 and 4 percent.

Acknowledging "a strong growth of global economy in 2021", the RPP observed that "global supply chain disruptions continue and international shipping costs are still elevated."

The situation has been aggravated by Russia's military invasion of Ukraine on February 24, sparking "uncertainty regarding the further course of the global macroeconomic situation.

"This has been reflected in a marked deterioration of sentiment in financial markets and a depreciation of some currencies," the RPP said.

The Polish zloty has been hit hard by the crisis in Ukraine along with other regional peers, sinking to levels not seen in the past two decades against both the USD and EUR.

"Prices of natural gas, oil and coal, as well as prices of some agricultural commodities have increased again," the RPP also said. "At the same time, global supply chain disruptions continue and international shipping costs are still elevated."

However, despite geopolitical challenges and growing uncertainty, the Polish economy remains strong and unemployment is at record-low levels, the RPP observed.

Tuesday's interest rate hike was the sixth in a row since the RPP embarked on the current cycle of raising interest rates. The reference rate now stands at 3.50 percent.