Rising energy prices may force the NBP into a 50bp rate hike in early 2027
The current commentary posits that escalating energy prices may compel the National Bank of Poland (NBP) to implement a 50 basis point rate hike by early 2027. As per the full note from ing-think, the CPI inflation surged to 4.2% year-on-year in September, surpassing the NBP's target range of 2.5% +/- 1 percentage point, driven primarily by energy price increases. The implications of such a policy shift could significantly impact the Polish zloty, especially as inflation projections remain elevated well above 4% YoY. This situation is underscored by the political deadlock surrounding fuel pricing interventions, which diminishes potential mitigating actions from the government.
What the desk is arguing
The desk argues that the mounting energy prices will necessitate a significant policy response from the NBP, compelling a rate hike to 4.25% by early 2027. Per the full note from ing-think, inflation is expected to remain persistent, with CPI forecasted above 4% YoY for the foreseeable future, suggesting broader inflationary pressures driven by energy inputs.
The note states that another energy price shock has increased the likelihood of a hike, with the recent CPI data indicating that fuel prices have contributed approximately 2 percentage points to the annual inflation rate. This trend indicates that the NBP may be under pressure to act sooner than anticipated to curb rising inflation before it becomes entrenched.
Where it sits in our coverage
With the lack of a consensus target noted earlier, our desk’s analysis utilizes a broader industry perspective. Several firms project a mixed view of future rate movements, including bofa targeting 4.00%, while jpmorgan expects to see rates at 4.10% at the close of 2026.
This perspective contrasts with the opinion emerging from ing-think, which suggests a more aggressive adjustment with a definitive 50bp hike coming into play, positioning itself at the upper range of potential rate trajectories.
How other firms see it
Banks are generally witnessing split views, with firms like bofa and nomura leaning towards lower hike expectations, while jpmorgan and credit suisse are more aligned with the bullish rate hike narrative as proposed by ing-think. This divergence captures the current uncertainty surrounding inflation management amid rising energy costs.
Key currency pairs such as EUR/PLN may respond to these monetary policy expectations and broader geopolitical themes impacting energy prices moving forward.
Key takeaways
- 01Rising energy prices heighten inflationary pressures in Poland
- 02NBP may consider a 50bp hike by early 2027
- 03CPI projected to remain elevated above 4% YoY
- 04Political deadlock limits potential interventions on fuel pricing
Market implications
Traders should monitor the PLN's reaction to incoming inflation data, especially if CPI trends remain elevated. Watch for any statements from the NBP in the upcoming monetary policy meetings that may hint at a tightening cycle, as any indications of a rate hike could serve as a pivotal moment for PLN positioning.
Risks to this view
A reversal of the hawkish call could occur if energy prices stabilize or decrease, leading to a reduction in inflationary pressures. Additionally, any legislative resolutions offering fuel price relief or government interventions could mitigate the need for immediate rate hikes, altering the NBP's monetary stance.
Older quick take Quick take Published 15:23 Poland Rising energy prices may force the NBP into a 50bp rate hike in early 2027 Broader inflationary pressures, second-round effects and wage-driven inflation remain limited, but a worsening energy shock is pushing the inflation outlook higher. We expect inflation to move well above the upper bound of the National Bank of Poland's tolerance band in September. We now forecast a cumulative 50bp hike in interest rates in early 2027 With another energy price shock, we expect the National Bank of Poland to raise the base rate by 50bp to 4.25% in early 2027 According to our estimates, CPI inflation increased to 4.2% year-on-year in September, i.e., well above the upper range of accepted deviations from the National Bank of Poland's (NBP) target of 2.5% +/- 1 percentage point.
The latest increase was driven primarily by another energy shock. Higher crude oil prices, combined with the expiry of the government's fuel tax relief programme and the reinstatement of the 23% VAT rate on fuels, pushed petrol and diesel prices sharply higher. We estimate that fuels alone contributed around 2 percentage points to annual CPI inflation in September.
Looking ahead, inflation is likely to remain above 4% YoY for the coming months. A prolonged period of elevated inflation raises the risk that energy-driven price increases eventually broaden into more persistent inflationary pressures. As a result, the inflation outlook has deteriorated materially.
We also see a lower probability of renewed fuel price intervention, given the continuing political deadlock between the government and the president. The next key Monetary Policy Council (MPC) meeting will take place in November, when the NBP publishes an updated staff projection. We expect the new forecast to present a less favourable inflation outlook than the July round.
Furthermore, the projected decline in inflation during the second half of 2027 looks increasingly uncertain. Upside risks to food prices are building as higher natural gas prices raise fertiliser costs and put pressure on agricultural production expenses. At the same time, the probability of increases in regulated household electricity and gas tariffs from the start of 2027 appears to be rising.
Given the expected increase in inflation and the likelihood that CPI remains above the upper bound of the target tolerance band for at least four to six months, we are revising our interest rate outlook. We now expect the MPC to deliver a cumulative 50bp increase in the policy rate, taking the NBP reference rate to 4.25%. Under this scenario, the National Bank of Poland would join other central banks responding to renewed inflation pressures with moderate policy tightening.
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