The inflation developments over the medium term will also be affected by the further fiscal and regulatory policy measures, the pace of economic recovery in Poland and the labour market conditions, the bank said.

Incoming data indicate that despite the observed gradual economic recovery, demand and cost pressures remain relatively low, which amidst weakened economic conditions and lower inflation pressure abroad curbs domestic inflation pressure, it said in a release.

Core inflation is running slightly above headline inflation.

Retail sales and industrial production were higher in July. Unemployment remains low and the number of working persons continues to be high, although employment in the enterprise sector in July was lower year on year (YoY). At the same time, the wage growth is still running on the high level.

The council said the rise in prices of energy carriers increases inflation significantly, and this factor will continue to affect the annual inflation rate in the coming quarters.

“When the effects of the energy price increase fade—amid the current NBP interest rates level—inflation should return to the medium-term NBP target, although the impact of higher energy prices on the inflation expectations is an uncertainty factor,” the release noted.

Fibre2Fashion News Desk (DS)