The National Bank of Poland (NBP) has raised its projections of inflation for the next few years, but it continues to expect CPI inflation to remain at the level below the NBP target (i.e. 2.5% y/y) throughout the projection horizon (i.e. by the end of 2015).
In NBP's March projection, the central bank expected inflation to remain below the lower band for deviations from the target until Q1 of 2015.
The November projection stipulates for average annual inflation at 1.0% in 2013 vs. 0.8% expected in the July document (compared to 3.7% reported in 2012). In 2014, the average annual CPI inflation should accelerate to 1.7% (vs. 1.2% expected in July) and further to 1.9% in 2015 (vs. 1.5% in the July document).
NBP attributes the upward revision of CPI inflation in the current projection round primarily to a rise in forecasted core inflation. According to the projection, core inflation net of food and energy prices will amount to 1.2% in 2013, 1.4% in 2014 and 1.5% in 2015.
The main reason for the rise in core inflation in the short-term projection horizon, as compared to the July projection, is the higher than projected rise in fees for municipal waste management that have been imposed by new legal provisions effective since July of 2013, it explained.
Furthermore, the central bank expects food price inflation throughout the projection horizon (i.e. by the end of 2015) and energy prices inflation in the long-term horizon to exert some positive impact.