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Inflation Trends in Poland: RPP’s Response and Global Economic Outlook

INVESTINGInflation Trends in Poland: RPP's Response and Global Economic Outlook

April’s inflation reading in Poland showed the first increase in the main measure since February 2023, largely attributed to the return of the 5% VAT on food. There’s considerable uncertainty regarding the future trajectory of price dynamics, expected to persist at least until June. This makes it difficult to anticipate specific communications regarding future actions from the central bank after Thursday’s MPC meeting and Friday’s press conference with President Glapiński.

Globally, attention has been focused on the United States, as the Federal Reserve has made it clear to markets that the bar for considering further interest rate hikes in the US is set very high, given the current macroeconomic readings.

Following Fed Chairman Jerome Powell’s press conference, the dollar experienced depreciation, further accelerated by a weaker-than-expected Non-Farm Payrolls report for April, leading to currency sell-offs. Ultimately, the dollar saw moderate declines against most major currencies, with the notable exception of the Japanese yen, which strengthened by over 2% against the dollar due to authorities’ intervention following its decades-low levels.

This week is light on data, shortened by today’s bank holiday observed in the UK, a major global currency trading center. However, attention will be focused on the UK, where GDP dynamics for the first quarter will be published on Friday following the Bank of England’s meeting on Thursday. Additionally, speeches from officials at the Federal Reserve and the European Central Bank throughout the week will be significant. Market conditions are likely to remain unchanged until further inflation data from various economic sectors is released. Currently, it appears increasingly difficult for the dollar to appreciate further from already high levels unless inflation dynamics prove to be very surprising.


The week ending with the May Day weekend was relatively calm for the Polish złoty. While the Polish currency performed the worst in the CEE region, differences were marginal, and the weakening against the euro was minimal (less than 0.2%).

Tuesday’s publication of inflation data stole headlines in economic press. April’s reading, as expected, brought the first increase in the main measure since February 2023 (to 2.4%), widely anticipated by economists. It’s worth noting a significant month-on-month increase (by 1.0%), attributed to the reintroduction of the 5% VAT rate on food and higher fuel prices. However, this development is rather positive – confirming our assumptions that the higher VAT rate will not only not directly translate into consumer prices but also that their increase will likely be gradual and spread over time. Most likely, the baseline inflation measure will trend downwards – confirmation of this thesis will have to wait until May 16.

Thursday (May 9) brings the Monetary Policy Council’s decision on monetary policy, which, aside from external factors, will be the focus of attention this week. Given the declines in inflation recorded in recent months, it’s unlikely that they will be permanent, so changes in the level of interest rates will not be the topic of discussion at the upcoming meetings. We also do not expect President Adam Glapiński to provide clearer forward guidance during Friday’s press conference. More specific guidance will likely have to wait until at least July. At the end of June, the current regulations regarding energy prices will expire, which – according to statements from the NBP president in previous conferences – is one of the key risk factors for inflation alongside dynamic wage growth.


Both the April inflation reading and the Q1 GDP suggest that the gap between the eurozone and US economies may be narrowing. Inflation dynamics surprised to the upside for the first time since January – its core measure (2.7%) was slightly higher than expected (2.6%). More positively, GDP growth was nearly 1% q/q in annualized terms, three times higher than expected, confirming that the eurozone economy has emerged from last year’s technical recession.

This week, there won’t be particularly significant releases from the eurozone. We expect a further slight appreciation of the euro on the back of slightly better data.


Last week’s FOMC meeting and April’s Non-Farm Payrolls report confirmed that speculations by some investors regarding further interest rate hikes should be considered exaggerated. During the press conference after the meeting, Chairman Powell struck a slightly dovish tone, suggesting that the Fed is not particularly concerned about inflationary pressures for now – the bar for further interest rate hikes is set high, and current data is far from reaching it. The NFP report was weaker than expected, and it also contained several indications that wage pressure is easing, despite the tight labor market.

There won’t be many new releases this week, so attention will be on a series of Fed officials’ speeches.


The British pound is performing better in 2024 than almost all other G10 currencies, except the US dollar. It’s supported by high interest rates, expectations that they will be maintained at a high level for a longer period, and currently, a series of positive readings regarding economic growth (both leading PMI indicators and current hard macroeconomic data).

The Bank of England’s meeting on Thursday (May 9) will allow us to determine whether the first two factors will continue to support the British currency – we expect the Monetary Policy Committee to clarify its plans regarding the timing of the first interest rate cut. Currently, markets expect this to happen no earlier than late summer. Any confirmation of these prospects by the Bank of England may strengthen the pound’s appreciation.

Authors: Enrique Díaz-Alvarez, Matthew Ryan, Roman Ziruk, Itsaso Apezteguia, Eduardo Moutinho, Michał Jóźwiak – Ebury analysts

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