Economic news

• RATES: The MPC kept interest rates unchanged at its May meeting last week. However, NBP president A. Glapiński struck a somewhat hawkish tone during his press conference. He said that the probability of interest rate hikes at some point later this year has risen since the previous MPC meeting. For it to happen there should be some signs of second round effects of current rise in energy costs. We uphold our forecast of no interest rate changes this year.
• CREDIT: In Q2 2026, banks intend to tighten lending criteria for large enterprises and leave them unchanged for SMEs, while easing them for household loans. At the same time, banks expect demand to increase for all types of credit, the NBP reported in the results of its survey among banks’ credit committees.
• BUDGET: The Ministry of Finance’s cash reserves amounted to PLN 188bn at the end of April—more than a month earlier, when they stood at PLN 169.4bn. This gives the Ministry a substantial flexibility in managing the supply of Treasury bonds at auctions.
• INVESTMENT: The government adopted a draft act on Individual Investment Accounts (OKI). Funds in OKI will be exempt from capital gains tax (19%), but will instead be subject to an asset tax with a rate linked to the NBP reference rate. The OKI act is expected to enter into force at the beginning of next year and will lower the effective tax rate for households on risky assets in Poland. According to the MoF’s estimates, in the first years after the act takes effect, around PLN 5bn per year is expected to flow into the WSE, assuming, among other things, that all holders of savings accounts and savings bonds move them to OKI up to the tax-exemption limit (PLN 25k per person), which we consider a rather optimistic assumption.
• LABOUR MARKET: According to preliminary data from the Ministry of Family, Labour and Social Policy (MRPiPS), the registered unemployment rate in April fell to 6.0% from 6.1% a month earlier. The reading was in line with market expectations.
• RATING: Rating agency S&P affirmed Poland’s long-term foreign-currency rating at “A-” with a stable outlook. The agency assesses that risks to Poland’s economic outlook have increased due to the war in the Middle East and rising energy prices. path

Inflation outlook in Poland and its implications for interest rates

Over the past two months, we have treated tensions around the Persian Gulf as a serious, yet still temporary supply shock with limited consequences for inflation forecasts. Today it is becoming increasingly difficult to maintain that narrative. The conflict is dragging on, prospects for an agreement remain fragile, crude flows through the Strait of Hormuz are still constrained, and oil prices have stabilized clearly above pre-escalation levels. In practice, this means one thing: the “fuel crisis” scenario is no longer a short-term risk, but is becoming the baseline scenario. If fuel shortages persist for longer, the negative economic consequences will gradually build, leaving the world with noticeably higher inflation and lower economic growth.

Since the end of February, the market price of Brent crude has risen rapidly from around USD 68 to an average of USD 100 per barrel, staying—amid very high volatility—near that level for a second month already. That is a move of roughly 45–50%—admittedly about two times smaller than the biggest crises in modern history, but still clearly standing out. Changes in oil prices of this magnitude have practically always translated into a visible inflation impulse. So the question is not “whether,” but “how strong” and “how spread out over time” the current effect will be.

US CPI inflation vs growth in market oil prices (% yoy)

Source: Macrobond, Pekao Research

First the fuel-sensitive categories, then the rest

What does the transmission mechanism of such an oil shock to inflation look like?

• 1-2 months after shock: fuels

The fastest and strongest reaction comes from those categories that are directly linked to oil prices—first, unsurprisingly, are prices at fuel stations. Here the effect is almost immediate and very strong. We already saw this in the March inflation data. With fuels accounting for 5.5% of the inflation basket, this translated into a direct contribution to inflation of 0.8 pp. Admittedly, the CPN programme limited pressure on retail fuel prices; however he relief visible to consumers does not imply analogous savings for businesses. Fuel spending treated as tax-deductible costs and the possibility of partial VAT deduction mean that companies benefit from this reduction only to a limited extent.

• 2-4 months: transport and energy

Second in line are sectors that are also highly dependent on fuel costs in their operations, such as transport services or package tourism. Fuel is a significant part of operating costs, margins are relatively low, and competition limits the ability to absorb the shock for an extended period.

The next stage involves household energy carriers (electricity, gas, heat). Here the transmission mechanism is more complex, because prices remain regulated and, in addition, smoothing mechanisms are in place (e.g., long-term contracts). The conflict in the Persian Gulf has also contributed to an increase in gas prices, for which a new household tariff will come into effect from July—we are awaiting the regulator’s decision. In the meantime, increases in the prices of gas cylinders and heating fuels (including coal) are already visible.

• 4-7 months: foods and consumer products

Only at the next stage does the shock begin to permeate into food prices and other consumer goods. Here the impact is clearly smaller, but more spread out over time. Firms gradually pass higher costs of energy, fertilizers, logistics and transport—along with more expensive derivative inputs—on to consumers; these are the so-called second-round effects. At the same time, some companies try to cushion the increase in costs by lowering margins, which limits the scale of the immediate pass-through to retail prices.

• 6-9 months: services

Most services react the slowest and the weakest. In their case, the impact of the oil shock remains limited, because labour costs are a much more important part of the cost base. An exception within this group is catering and tourism services, where higher food and transport prices translate relatively quickly into final prices. Even so, the scale of the reaction remains clearly lower than for goods.

According to our analyses, the peak impact of the current fuel shock on inflation will appear around 5–6 months after it began. Assuming March as the start of the current shock and assuming its current structure and scale are maintained (oil price around $100/barrel, natural gas at 50 EUR/MWh), the strongest impact on consumer inflation should be expected at the turn of the third and fourth quarters. By the end of 2026, the current fuel crisis could lift inflation by around 2 percentage points. Importantly, core inflation will react mainly through the goods channel, not services—which, additionally, given the currently weakening position of workers in the labour market, limits the risk of high inflation becoming entrenched for longer.

Estimated contribution of inflation categories to the increase in CPI dynamics in response to the current oil crisis (p.p.)

Source: Statistics Poland, Pekao Research

The decomposition of the impact on CPI shows that by the end of 2026 around 60% of the total effect (about 1.2 pp) will result from the direct channel of higher prices of fuels, transport and energy carriers. The remaining 40% (about 0.8 pp) are second-round effects, which we will see in higher food prices, other consumer goods, and—least of all—in services.

Implications for the monetary policy and CPI forecast

In light of the results above, we see a need to revise our inflation path upward. The fuel shock will gradually push CPI inflation higher over the coming quarters, with the effect peaking at the turn of the third and fourth quarters. We assume that by the end of 2026 inflation will approach 4% yoy, reaching a local peak. Of course, this scenario assumes that the current fuel crisis persists in a form similar to what we are observing today. The 4% inflation level now appears to be the boundary separating two scenarios: below it lie forecasts assuming a rapid de-escalation of the conflict and a lack of significant second-round effects.

From a monetary-policy perspective, this implies a classic dilemma: whether to respond to a clear rise in inflation or to treat it as a largely temporary cost-push impulse. At the same time, the nature of the current shock remains relatively narrow - concentrated in energy-intensive sectors and only partially spilling over into broad inflation. The key for further developments will therefore be whether high oil prices persist long enough for the inflation impulse to become entrenched, lift consumers’ inflation expectations, and broaden to subsequent segments of the economy.

These considerations were visible in the latest press conference of NBP President. Adam Glapiński admitted that the probability of rate hikes has increased and such move is possible if inflation moved above the band of permissible deviations from the target (3.5%) or headed in that direction according to the NBP projection. The window for rate hikes can therefore be envisaged in two ways: either inflation will rise steadily this year, in line with the mechanism and scenario outlined above, or it will jump next year due to increases in administered prices. We consider the first option much more likely than the second, because in the latter case the public sector would be expected to shoulder the burden (support shields). This means that the second half of the year (starting in July) will be a particularly sensitive period for Polish monetary policy.

However, the NBP President did not explicitly announce rate hikes, and they should not be treated as the Council’s baseline scenario. Their probability has increased, but they are by no means certain. The President left himself a wide escape hatch here—they will not be needed if the war in the Gulf ends, the Strait of Hormuz is unblocked, and oil prices fall.

We believe that rates will remain unchanged through year-end. From a market perspective, the hawkish notes from the NBP reinforce market pricing that has been in place for some time, but not necessarily a signal of a new direction for investors. Markets currently price in a tightening of monetary policy in Poland of around 50–75 bp (depending on the horizon), and expectations toward the NBP fit well into the European pattern— the ECB is expected to raise rates this year by around 60 bp.

Financial market update

The end of last week was a tough one for Polish assets – the zloty weakened, share prices on the Warsaw Stock Exchange fell, and yields on government securities rose (albeit only slightly). In short – despite cautious optimism on global markets, investors preferred to close their positions ahead of the weekend. As no breakthrough occurred over the weekend and global markets are opening in a more negative mood, in hindsight this was not a bad strategy, and the reaction of Polish assets at the start of the week should prove modest. What will the coming days bring? The release of key data from the Polish economy (14 May – Q1 GDP, 15 May – final CPI) and the government bond auction (13 May). Of these three, the auction is likely to be the most important. In recent months, demand for domestic bonds has fallen relative to pre-war levels, and the Ministry is also forced to place bonds at lower prices than those prevailing before the outbreak of the war in the Persian Gulf. A balance has thus emerged in the market, but it may be considered fragile. For this reason, it is worth monitoring the government bond market’s reaction to additional supply. We would also draw attention to the PLN interest rate path priced in by the markets – following the NBP Governor’s press conference, which was perceived as rather hawkish, there was no significant repricing of these expectations (the 2-year IRS rate rose by mere 3 basis points). This is rather unusual – in the past, markets viewed the cycle of hikes/cuts as a moving target, maintaining a certain spread between the forecast consensus and MPC statements on the one hand, and their own pricing on the other. The absence of such a mechanism may be linked here to the European dimension of monetary policy tightening expectations. If markets expect a larger scale of ECB rate hikes, we will see the same in the priced NBP rate path.