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FOR Communication 21/2023: Are prices in Poland nearly stagnant? Continuation of NBP's "information" campaign

The National Bank of Poland continues its "information" campaign. In the first days of August, a new banner appeared on the main facade of the NBP headquarters. On this monumental billboard, we can read: "Thanks to NBP, Poland is on the right track, prices have hardly changed for 4 months now!" The statement is accompanied by a chart showing the price index over the last four months on a month-to-month basis. Additionally, the NBP is conducting an online campaign, having recently released a video spot and publishing paid advertisements on its website, including the following infographic.

This is another communication from the Polish central bank that misleads the public! In its previous billboard, the NBP pointed out that the main causes of high inflation in Poland are global pandemic and the war in Ukraine. We addressed these claims in our earlier publication (FOR Communication 14/2023: National Political Bank - guarding the party rather than the currency).

Firstly, it should be noted that according to the resolution of the Monetary Policy Council, the inflation target in Poland is 2.5%, with a tolerable deviation of ±1 percentage point. In August, CPI inflation was 10.1% year on year. Government forecasts are also not optimistic. According to the state budget, the average annual inflation will fall below the upper range of deviations from the target (i.e., below 3.5%) in 2026.

When year-on-year inflation remains not only significantly higher than the target but also in double digits, the NBP, wanting to convince Poles that the situation is improving ahead of the upcoming elections, resorts to presenting month-to-month inflation data. It ignores the fact that the real source of the momentary slowdown in month-to-month CPI inflation should be attributed to factors independent of the central bank, such as:

  • Seasonal variation – the summer period is the time of harvest. Fruits, vegetables, and grains mature, causing food prices to drop. Over the past 22 years, month-to-month inflation in July has been positive only four times, two of which were during periods of soaring prices (2021-2022). In general, June, July, and August historically have the lowest month-to-month inflation in Poland.
  • Oil prices on the world markets – from mid-2022 to mid-this year, we observed a decline in the price of a barrel of oil. Additionally, during this period, the Polish currency strengthened against the dollar. As a result, the price of a barrel of oil expressed in złoty fell for a long time, leading to a decline in inflation.

Chart 1. Brent crude oil price at the end of the month in PLN

Source: FOR own study based on data from stooq.pl

The full content of the publication can be found in the file to download below.

Contact to author:

Antoni Baczyński, FOR Intern
[email protected]

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