Inflation above the flash estimate by Statistics Poland

Inflation above the flash estimate by Statistics Poland

In accordance with the final data released by Statistics Poland (GUS), CPI inflation in Poland came in at 2.9% YoY in August, down from 3.1% in July and above the GUS’ flash estimate (2.8%). An upward revision was applied to the prices of food and non-alcoholic beverages and core prices.

The strongest downward impact on inflation came from lower core inflation, which edged down from 3.3% YoY in July to 3.2% in August in accordance with our estimates. The drop was driven by a slower price growth in such categories as “miscellaneous goods and services”, “recreation and culture”, “furnishings, household equipment and routine household maintenance” or “transport, excluding fuels”, which offset a markedly stronger price growth in the “communication” category resulting from higher prices for mobile phone services. Inflation was also driven down by a slightly slower price growth in such categories as “fuels” (-7.7% vs. -6.8%) and “energy” (2.3% vs. 2.4%), whose combined downward impact on inflation was approx. 0.06 pp. Price growth in the “food and non-alcoholic beverages” category did not change between July and August, printing at 4.9%.

Service price growth rate still elevated

In our opinion, core prices increased by approx. 0.2% MoM in August, which is above their seasonal pattern (0.0% MoM), indicating continued elevated inflationary pressures. Continued strong growth in the prices of services (6.0% YoY in August vs. 6.2% YoY in July) is a worrying trend, with goods price growth remaining markedly lower (1.7% vs. 1.9%), and following a clear downward trend in recent months. The easing yet still relatively strong wage pressure continues to be the main pro-inflationary factor in services. We expect the nominal wage growth in the national economy to go down to 7.5% YoY in Q3, from 8.8% in Q2 and 10.0% in Q1. Therefore, it will remain relatively high by historical standards despite the continued decline.

Durable inflation drop as an argument in favour of further interest rate cuts

We still expect average annual CPI inflation to reach 3.7% YoY in 2025, compared to 3.6% in 2024, and then fall to 2.9% in 2026. At the same time, inflation will run within the range of admissible deviations from the NBP inflation target (2.5% ±1 pp.) across the entire horizon of our forecast (i.e. until the end of 2026). However, we feel there is a slight upside risk to our scenario, which arises from heat and water price increases in Q4 2025. We believe that the prospect of inflation staying within the tolerance band will give the MPC an argument in favour of continued monetary easing. We anticipate that the MPC will cut the interest rates by 25bp once again, when they see the results of the November projection. We believe that subsequent rate cuts will take place in March and May 2026, each time by 25bp, and they will end the monetary policy easing cycle, with the reference rate standing at 4.00%.

In our opinion, today’s data on inflation will be neutral for the PLN and the yields on Polish bonds.