MPC is not afraid of second-round effects

Interest rates remain unchanged

The Monetary Policy Council (MPC) decided today to keep NBP interest rates unchanged, with the reference rate remaining at 3.75%. The MPC’s decision was consistent with both our forecast and market expectations. In its post-meeting press release, the Council noted that “as a consequence of supply constraints related to the conflict in the Middle East, prices of fuels surged globally”, and that “the outlook for global activity and inflation is subject to significant uncertainty, related, in particular, to geopolitical situation”. The Council pointed out that the increase in inflation from 2.1% YoY in February to 3.0% in March (according to Statistics Poland’s flash estimate) was driven mainly by the sharp rise in fuel prices linked to the conflict in the Middle East. The Council also stressed that the outlook for inflation and economic activity in Poland is currently “influenced by changes in macroeconomic situation abroad, including changes in global commodity prices and inflation, amid geopolitical context”. The Council again identified the main risk factors for the inflation outlook, namely “fiscal policy and regulation concerning fuel prices as well as changes in growth of activity in the Polish economy and further developments in wage growth”.

NBP Governor: low probability of second-round effects

At the press conference following the MPC meeting, NBP Governor Adam Glapiński stressed that the rise in energy commodity prices triggered by the conflict in the Middle East was a supply shock that is pushing inflation up while slowing economic growth. In his view, weaker economic growth will limit the scale of the inflationary impulse generated by the commodity shock, which is why keeping interest rates unchanged is justified under the current conditions. The Governor said that the monetary policy outlook depends to a large extent on developments in the Middle East. In his assessment, the Council is taking into account the possibility of secondary inflationary effects, or so-called second-round effects, stemming from higher fuel prices and inflation. He believes, however, that the probability of such effects is low, and is being reduced by the ceasefire between the US, Iran and Israel, as well as the expected rebuilding of the infrastructure needed for energy commodity extraction in the Persian Gulf region. The Governor also stressed that “there is nothing to suggest that we have moved away from the NBP inflation target (2.5% +/- 1 pp)”. In his view, NBP interest rates will remain unchanged in the near term and a rate hike is “out of the question” for now, although he did not rule out monetary tightening in the event of an escalation of the conflict in the Middle East. He also noted that the rate cut previously signalled by some MPC members is now “in doubt”.

NBP interest rates to remain unchanged for an extended period

In our view, the post-meeting statement and the NBP Governor’s remarks support our scenario, under which NBP interest rates will remain unchanged for an extended period. We believe that the conflict in the Middle East will lead to a sustained increase in crude oil prices, which will remain elevated over the coming quarters compared with pre-conflict levels. As a result, assuming the fuel market intervention mechanism remains in place, including reduced VAT and excise duty as well as the price cap, inflation will follow an upward trend in the coming months, reaching a local peak of 4.1% in December (see MACROmap of 06/04/2026). In our view, under this scenario there is no room for interest rate cuts in the coming quarters, while the risk of a “signalling” rate hike in H2 2026 is significant. Our scenario is subject to considerable uncertainty regarding the durability of the ceasefire announced by the parties to the conflict in the Persian Gulf region and the safety of shipping through the Strait of Hormuz, which may remain constrained despite the de-escalation of military action.

In our view, today’s MPC decision to keep interest rates unchanged, the wording of the post-meeting press release and the NBP Governor’s remarks at the post-meeting press conference are slightly negative for the PLN and yields on Polish bonds.