Inflation surprised, but the Monetary Policy Council will not give up. The decision is already made

A smaller than expected drop in inflation in January will not stop the Monetary Policy Council from cutting rates in March; disinflationary processes are already deeply rooted in the economy – ING BSK economists estimate. The March NBP projection may provide a significantly more favorable picture of the inflation prospects than in the November projection.

“Despite a slightly higher CPI reading for January, the general picture of price processes remains unchanged and disinflation mechanisms are firmly entrenched. Therefore, we see room for further easing of monetary policy. Recent statements by representatives of the Monetary Policy Council (MPC) suggest that a 25 bp interest rate cut in March is basically a foregone conclusion,” the economists wrote in the report.

We expect that the March NBP projection will provide a significantly more favorable picture of the inflation prospects than in the November projection. As a result, the target level of interest rates, which according to the majority of the Council is currently expected to be 3.50%, may turn out to be lower in practice. In our opinion, interest rates may be reduced to 3.25% this year. or even below, they added.

On Friday, the Central Statistical Office reported that the prices of consumer goods and services in January 2026 increased by 2.2% year on year, and compared to the previous month, prices increased by 0.6%. Analysts surveyed by PAP Biznes expected a price increase of 1.9% in January. y/y and growth by 0.6%. mdm.

“We see three reasons why inflation did not fall as much as we expected. Food prices (2.4% yoy – the same as in December) and energy prices (3.4% yoy vs. 2.8% yoy a month earlier) turned out to be higher than our expectations. The third element is of a technical nature. The switch from January 2026 to the COICOP 2018 classification could also have contributed to the higher than expected inflation reading,” ING economists point out BSK.

Although the weighting system in the estimated data for January remained the same as in 2025, the transition of some subcategories to other groups of goods may have changed their relative weights. As a result, although the price change in monthly terms was in line with our forecast (0.6%), the annual inflation was 0.2-0.3 percentage points. higher – they add.

The authors of the report emphasize that January's inflation data are preliminary.

“Although they are based on the new COICOP classification, they are still based on the same weighting system used in 2025 and will be revised in March with the publication of data for February and the annual update of the CPI basket weights,” wrote the ING report. (PAP Business)

stalemate/ gor/