Poland's central bank has revised its inflation forecast upward, citing higher energy prices that are expected to push price growth above its target range in the coming years. The National Bank of Poland (NBP) now sees average inflation at 4.2% in 2027, a notable jump from its previous projections.
The updated forecast, released in November, reflects the bank's view that energy costs will remain elevated and gradually feed through to other prices, including food and everyday goods. The NBP's inflation target is 1.5% to 3.5%, and the bank expects inflation to sit at the top of that range in the third quarter of this year before moving above it in subsequent quarters.
What's driving the higher inflation outlook?
The main culprit is energy. The NBP's November projection builds in higher energy prices, which have been volatile amid geopolitical tensions and supply concerns. When energy costs rise, they don't just affect utility bills—they also raise the cost of producing and transporting goods, which can push up food prices and other consumer items over time.
That's why the bank's 2027 forecast of 4.2% average inflation stands out. It suggests that even a few years out, price pressures will remain above the central bank's comfort zone, a shift from earlier expectations of a return to target.
Still, the NBP does not see a broad loss of price control. Its forecast for "core" inflation—which strips out volatile energy and food prices—shows it staying within the target band, drifting from 3.0% in 2026 to 2.8% by 2028. That suggests the bank views the overshoot as largely energy-driven rather than a sign of widespread overheating.
Growth outlook remains solid
On the growth side, the NBP is fairly optimistic. It projects a solid 3.6% expansion in 2026, helped by inflows of European Union funds, before slowing to 2.8% in 2027-2028. The biggest wild card, according to the bank, is how geopolitical tensions affect energy markets—a factor that could push both growth and inflation in either direction.
For context, Poland has been one of the faster-growing economies in the European Union in recent years, supported by strong domestic demand and EU funding. But like many countries in the region, it has faced an inflation surge since the pandemic and the energy crisis triggered by Russia's invasion of Ukraine.
What it means for investors
For markets, the NBP's higher inflation view could keep Poland's discount rate—the key interest rate—higher for longer. When a central bank signals inflation above its own target, investors typically assume rate cuts will come later or be smaller than previously thought, even if officials blame energy.
That usually hits short-dated Polish government bonds first, because their yields track expectations for policy rates. Higher yields can then support the zloty by widening Poland's interest-rate advantage over peers, while also raising the borrowing hurdle for rate-sensitive companies and households. In other words, a stickier inflation forecast can tighten financial conditions even if the growth story looks fine on paper.
For everyday investors, this means a few things to watch. If you hold Polish bonds or funds that invest in them, expect yields to stay elevated. If you're invested in Polish equities, higher-for-longer rates could weigh on companies that rely heavily on borrowing, such as real estate or consumer discretionary firms. On the flip side, banks and other financial institutions often benefit from wider interest margins.
The NBP's next moves will depend on incoming data, particularly energy prices and how quickly the inflation overshoot fades. As with other central banks, the path is uncertain, and geopolitical developments could shift the outlook again.
For a broader view of how inflation and rate expectations are moving across major economies, you can check our coverage of US productivity and labor costs and the latest jobs report. And for how energy costs are affecting other sectors, see Qantas's fuel bill warning.
