ING economists have revised their outlook for Polish interest rates and now expect a total of 50 basis points of increases at the beginning of 2027. Under that scenario, the National Bank of Poland’s reference rate would rise from 3.75% to 4.25%. The change reflects a longer-lasting energy shock and the risk that inflation remains above the upper boundary of the NBP target range for several months.
ING had previously expected rates to remain stable. The deterioration in the energy outlook has changed that assessment, with economists increasingly treating higher energy prices as more than a short-lived disturbance.
Statistics Poland’s preliminary estimate showed CPI inflation rising to 4.0% year on year in September from 3.4% in August. The reading was slightly below ING’s 4.2% forecast and the 4.1% market consensus referenced by the bank.
Fuel accounts for about half of inflation, according to ING
Fuel prices increased sharply in September compared with August. ING estimates that fuel is currently contributing around 2 percentage points to the annual CPI rate, roughly half of total inflation.
Higher commodity prices and tax changes are pushing prices at filling stations upward. As a result, fuel has shifted from being a disinflationary factor to a significant source of price pressure.
ING expects inflation to remain close to 4% for the next few months, keeping CPI above the upper boundary of the NBP target range of 2.5% plus or minus 1 percentage point.
ING expects the reference rate to rise to 4.25%
The most important change is the bank’s forecast for monetary policy. ING now expects 50 basis points of rate hikes in early 2027, which would lift the reference rate from 3.75% to 4.25%.
The economists stress that the current situation differs from the 2021–2023 inflation episode. So far, there is no clear evidence of strong second-round effects in which the initial energy shock spreads broadly into wages and prices across the economy.
The risk, however, rises the longer the energy shock lasts. If energy costs remain high, more companies may begin passing those costs on to customers.
Food prices may become less supportive
Food is another source of uncertainty. Seasonal declines in some food prices began earlier than usual this year and, according to ING, may also end earlier.
At the same time, core inflation has edged higher from a relatively low comparison base. This could delay the point at which headline inflation moves decisively back toward the NBP target.
The November NBP projection could be important
One of the key inputs for the Monetary Policy Council will be the NBP’s November inflation and GDP projection. ING expects it to show a less favourable inflation path than the July projection.
The bank argues that several months of inflation clearly above the target band could strengthen the case for a preventive monetary-policy response. ING’s base case is for hikes to begin in early 2027 and total 50 basis points.
Market pricing implies a larger move
ING’s forecast is still more moderate than the scale of tightening implied by market pricing, according to the bank’s economists. The next few months will depend heavily on oil and gas prices, food inflation and whether the energy shock spreads to a broader range of goods and services.
This article is for information purposes only and does not constitute investment advice.
