Inflation still follows the downward trend

Final inflation figures slightly above the flash estimate

In accordance with final data, CPI inflation in Poland declined from 2.7% YoY in October to 2.5% in November, coming in slightly above Statistics Poland’s flash estimate (2.4%). Slower growth in the prices of food and non-alcoholic beverages (2.7% in November vs. 3.4% in October) was an important factor behind the decline in inflation. The weaker price growth in this category was caused, among other factors, by slower growth in fruit and vegetables (a bumper harvest effect), butter (owing to overproduction of milk among the world’s main exporters of dairy products) and meat prices. With a downward impact of approx. 20bp – similar in magnitude to that of food prices – core inflation also contributed to the decline in headline inflation, as, in line with our estimates, it fell from 3.0% YoY in October to 2.7% YoY in November, its lowest level since November 2019. This was largely due to slower price growth in “communication”, “clothing and footwear” and “furnishings, household equipment and routine household maintenance” categories. It is worth noting that monthly core inflation edged down in November to -0.1% MoM, from 0.0% in October, coming in below its seasonal pattern (+0.1% MoM). In our view, this points to weakening inflationary pressures. A stronger growth in energy prices (2.7% vs. 2.6%) had the opposite impact on headline inflation. It is also worth noting that the increase in district heating prices following their unfreezing in mid-2025 has been limited so far (0.1% MoM in November, and 3.7% since September).

Inflation pressure cools down

Particularly noteworthy in the November inflation breakdown is the slowdown of growth in the prices of services seen for the fourth month running, from 5.6% YoY in October to 5.3% in November. Consequently, even though it still significantly exceeds the growth in goods prices (1.4% YoY in November), its decline, coupled with the drop in core inflation, suggests that inflationary pressures are gradually easing. We expect headline inflation to run close to the inflation target over the coming quarters. In Q4 2026, inflation will accelerate to 3.3%, mainly due to low base effects in food and fuel prices. As we expect inflation to fall temporarily below the inflation target in Q1 2026, to a local minimum of 2.1% in February, we maintain our scenario in which the MPC will deliver one more 25bp interest rate cut in Q1 2026. Consequently, the reference rate will stand at 3.75%.

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