Economic comment

The NBP president's conference was kept in a fairly hawkish tone. Adam Glapinski focused on upward risk factors for the CPI and said that the NBP expects inflation to reach 5.5% by the end of the year (close to our forecast) if the new energy regulation goes into effect, while core inflation will likely stay above 4%. According to Glapiński, rate cuts will become possible as soon as inflation stabilises at a proper level (or if forecasts show its imminent stabilisation), in line with the NBP target, and the earliest this will be considered is 1Q25. In our view rate cuts will not happen before 2H2025.

In today's Eyeopener:

- MPC and Bank of England meetings today, no change in rates expected
- Registered unemployment rate down to 5.1% in April
- Occupancy at tourist facilities in February lower than a year earlier
- EURPLN below 4.30, little change in interest rate market

According to the CSO's preliminary estimate, inflation rose to 2.4% y/y (1% m/m) in April, up from 2.0% in March, below the market consensus of 2.5% and our estimate of 2.7%. The downward surprise compared to our estimate was mainly due to food prices, but fuel and energy prices were also slightly lower than we had expected. The large increase in food prices on a monthly basis was mainly due to the return of a higher VAT rate on food. Our forecast for core inflation slipped slightly to 4.1%. We assume that the higher VAT may gradually translate into food prices collected by the statistical office in the following months as well. Our baseline scenario assumes a gradual increase in inflation to 2.8% in May and around 5% by year-end. We assume that core inflation will remain in the 3.9-4.8% range until the end of next year, which will keep the MPC from cutting rates quickly.