Inflation markedly above expectations

In accordance with the data provided by Statistics Poland (GUS), CPI inflation in Poland went up from 4.7% YoY in December to 5.3% in January, printing markedly above market expectations (5.0%) and our forecast (4.9%). It also reached the highest level since December 2023. Data on January inflation is incomplete yet, and it is only preliminary due to the annual revision of weights in the inflation basket. Thus, the possibility of drawing conclusions based on data is limited. Complete data on price growth in individual categories in January and February 2025 including the revised inflation index will be published in March.

Broad-based inflation rise

In accordance with the partial data provided by the GUS, inflation rise between December and January was broad-based, and was seen in all main categories. Inflation was mostly driven up by a faster growth in the pries of fuels (0.1% YoY in January vs. -3.9% in December) resulting from a strong growth in the prices of oil (converted to PLN) in the global markets seen at the turn of December and January as well as last year’s low base effect. A stronger growth in the prices of food and non-alcoholic beverages (5.5% vs. 4.8%) was another reason behind the inflation rise. In our opinion, it was largely attributable to the acceleration of price growth in the “milk, cheese, eggs” and “oils and fats” categories. Headline inflation was driven up by a stronger growth in the prices of “energy” (13.2% vs. 12.0%) and higher core inflation, which we estimate to have risen from 3.9% in December to 4.1% in January. We estimate that the monthly core inflation in January stood at 0.5%, markedly above its seasonal pattern (0.0% for a January). It suggests that inflationary pressures in Poland are still elevated, which is conducive to prices being raised more strongly by companies updating their pricelists at the beginning of the year.

Upside risk for our inflation path and rate scenario

With the starting point being higher than we expected (we forecasted the inflation to rise to 4.9% in January), we believe there is an upside risk to our forecast, in which inflation is to rise from 4.8% YoY in Q4 to 4.9% in Q1, and from 3.7% in 2024 to 3.9% in 2025. At the same time, the data also carries an upside risk to our scenario in which the MPC is to cut interest rates by 25bp in Q3.

Today’s higher-than-expected inflation data is slightly positive for the PN and the yields on Polish bonds.