The National Bank of Poland (NBP) is expected to keep rates on hold at a meeting of its monetary policy body on April 5.

Poland’s headline inflation eased in March to 16.2% year on year from 18.4% y/y in February but core inflation – prices without energy and food – continued its growth, rising to 0.3pp to 12.3% y/y in March, according to analyst estimates.

“Headline inflation should subside after the peak in February, due to base effects on energy and fuel prices. However, core inflation should remain persistently high,” ING said in a preview of the NBP meeting.

“Companies still pass costs onto consumers. As a result, CPI in December 2023 should hover around 9% y/y. This is likely to prevent the NBP from easing in 2023. This week's NBP meeting should call that direction,” ING added.

The inflation outlook is complicated by the expected revival of economic activity later this year, according to Santander Bank Polska.

Disinflation could probably accelerate in the scenario of a deeper and more permanent recession in domestic demand. “For the time being, however, we do not see sufficient arguments for a significant deterioration in economic growth forecasts,” Santander said.

Poland’s economic growth dwindled to 0.4% y/y in the fourth quarter, easing from an expansion of 4.5% y/y in Q3. Full-year economic growth is predicted to be no more than 1%, most forecasts say.

Some rate setters offer a more pessimistic outlook on inflation, since the NBP’s inflation projection assumes that price growth will not return to the central bank’s target of 2.5% even in 2025.

"We are in real danger of returning to interest rate increases because inflation will persist at an elevated level and will not fall any more," Ludwik Kotecki told Business Insider Polska.