Good news about inflation. MPC: Probably significant reduction

The dynamics of annual consumer inflation are likely to moderate significantly in the coming months, it was announced after the Monetary Policy Council meeting.

The Monetary Policy Council assessed that inflation developments in the coming quarters are subject to uncertainty, including those related to the impact of fiscal and regulatory policies on price processes, as well as the pace of economic recovery in Poland.

“According to the Council’s assessment, incoming data indicate that despite the observed economic recovery, demand and cost pressures in the Polish economy remain low, which, in the context of weakened economic conditions and declining inflationary pressures abroad, will contribute to a gradual decline in inflation. domestic inflation. In the coming months, annual CPI dynamics are likely to moderate significantly, with the decline in core inflation being slower. At the same time, inflation developments in the coming quarters are subject to uncertainty, including the impact of fiscal and regulatory policies on price processes, as well as on the pace of economic recovery in Poland,” we read in the press release.

Anti-inflation factors

The Monetary Policy Council estimates that strengthening the zloty exchange rate, which is consistent with the fundamentals of the Polish economy, will help reduce inflation. “The annual momentum of economic activity in the fourth quarter of 2023 increased, but remained relatively low,” it was also reported.

“The process of disinflation is underway in the environment of the Polish economy, and in many countries annual price dynamics are still high. The decline in inflation is driven by the reduction in cost pressures, which is also visible in the decline in production prices. as the low dynamics of economic activity. Under these conditions, many economies are experiencing a decline in core inflation, although it is still high,” we read on.

The Council continued to maintain that the current level of NBP rates supports the achievement of the medium-term inflation target and that Council decisions will depend on incoming information on the outlook for inflation and economic activity.

Decision on interest rates

“The NBP will continue to take all necessary measures to ensure macroeconomic and financial stability, including in particular the return of inflation to the NBP’s medium-term inflation target. The NBP could intervene in the foreign exchange market,” we read further.

The Monetary Policy Council decided to leave the NBP rate unchanged, with the main reference rate being 5.75%. The market consensus assumed that no changes would occur.

A press conference by the President of the NBP and the Chairman of the Monetary Policy Board, Adam Glapiński, is scheduled for Wednesday, January 10 this year at 3 p.m.

Source: Do Rzeczy

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