Poland's inflation to peak around June says central bank head

"We expect that inflation will temporarily decline in the first quarter of this year thanks to the government's anti-inflation shield which will significantly mitigate the impact of inflation, but it will rise in the second quarter to reach its peak somewhere close to June, the middle of the year, at above 8 percent," Glapiński said. Paweł Supernak/PAP

Inflation in Poland will peak at more than 8 percent in the middle of this year after a slight fall in the first quarter of 2022, Adam Glapiński, the governor of National Bank of Poland (NBP), has said.

Speaking at a press conference on Wednesday, one day after the central bank's Monetary Policy Council (RPP) raised interest rates by another 50 basis points, Glapiński said the expected first-quarter inflation decline will be a result of the government's anti-inflation shield.

The shield consists of a set of subsidies and tax cuts, designed mainly for low-earners, which are aimed to help society weather inflation levels reaching 8 percent and hikes of 24 and 54 percent in the price of electricity and gas. However, the scheme will only run for a couple of months.

"We expect that inflation will temporarily decline in the first quarter of this year thanks to the government's anti-inflation shield which will significantly mitigate the impact of inflation, but it will rise in the second quarter to reach its peak somewhere close to June, the middle of the year, at above 8 percent," Glapiński said.

The governor admitted that this year inflation rate will remain above the central bank's target of 2.5 percent, plus/minus 1 percent.

Inflation will be "at a decent level, significantly lower," in 2023, Glapiński said but failed to name any concrete figure.

According to the central bank governor, there is still room for rate hikes.

"The RPP should maintain the pace of 50 bps rate hikes," he said, adding that "a 3-percent rate should not cause any negative effects to the economy."

At their meeting on Tuesday, the RPP raised Poland's main interest rate to 2.25 percent, the fourth subsequent hike after a one-and-a-half-year period of record-low interest rates owing to the coronavirus pandemic.

"If economic growth improves, an interest rate increase to 4 percent will not harm the economy," Glapiński went on to say.

"Taking into account the NBP's current forecast, I would advocate for the RPP to make one more hike," Glapiński said.