Consumer CPI inflation in the early months of next year could be lower than predicted in the latest NBP projection in November, the NBP vice president said.
– Currently, it appears that if energy and gas prices freeze in the first months of next year, inflation could be lower than predicted in the November NBP projection, while in the longer term price dynamics are subject to uncertainty as on the one hand, it will depend on the pace of the expected economic recovery, and on the other hand – on the above-mentioned fiscal and regulatory factors, including VAT rates on food and energy prices – said Marta Kightley, vice president of the NBP . and First Vice President of the NBP, during the meeting of the Parliamentary Committee on Public Finance on “Monetary Policy Assumptions for 2024”.
According to the Central Bureau of Statistics (GUS), consumer inflation was 6.6%. on an annual basis in November 2023. Compared to the previous month, prices of goods and services increased by 0.7%.
In December, the Minister of Finance signed a regulation extending the application of the 0 percent rate. goods and services tax (VAT) on food. The regulation states that the reduced rate will apply until March 31, 2024. Finance Minister Andrzej Domański later said that the frozen energy prices could be extended until the second half of the year. next year will be analyzed at the end of Q1 2024.
Preliminary NBP forecasts
As reported by the National Bank of Poland in November, consumer inflation – according to the central path of the inflation projection – will be 11.4%. in 2023 4.6 percent in 2024 and 3.7 percent in 2025 (compared to 11.9%, 5.2% and 3.6% respectively for these years in the July projection), the National Bank of Poland reported ( NBP). CPI inflation will return to the range of deviations from the NBP inflation target – defined as 2.5%. +/- 1 percentage point – at the end of the projection horizon, and the balance of uncertainty factors in the projection indicates a broadly symmetrical distribution of risks to GDP dynamics and upward asymmetry of risks to CPI inflation.
In 2023, consumer inflation – according to the central path of the inflation projection – will be 6.7%. y/y in the fourth quarter of this year In 2024 this will be respectively in the following quarters: 5%, 4.4%, 4.6% each. in Q3 and Q4, and in 2025: 4.2%, 3.7%, 3.6%. and 3.5 percent..
The November projection from the NECMOD model covers the period from the fourth quarter of 2023 to the fourth quarter of 2025 – the starting point of the projection is the third quarter of 2023. The projection is based on unchanged NBP interest rates, including the reference interest rate of 5.75 percent, taking into account the available data. until October 23, 2023 (cut-off date).
As Jacek Kotłowski, deputy director of the NBP Department for Economic Analysis, reported: a return to 5%. The VAT rates will increase inflation by 0.9 percentage points. in 2024 and will have no impact on inflation in 2025, he pointed out that food prices are the factor farmers look most closely at when formulating their inflation expectations.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
