EME Macro/Strategy: Poland - New MPC to face a difficult inflation challenge

The economic recovery is broadening across the sectors, which should accentuate the already-tight labour market and the inflationary pressures that have been increasingly evident this year. Real GDP jumped 10.3% yoy in 2Q21, partly boosted by base effects. It should average 5% this year, in our view, and continue at the same pace for the following two years. Inflation may be close to a peak, but there are strong risks that accelerating housing costs, rising energy prices and/or historically high inflation expectations could keep inflation sticky at 4% and above. The NBP appears reluctant to begin the monetary tightening cycle, partly due to the uncertainty surrounding the COVID-19 pandemic, and partly to the uncertainty on fiscal policy as the ruling coalition is frail.