Sharp rise in inflation in March

Sharp rise in inflation in March

According to Statistics Poland (GUS) data, CPI inflation rose to 3.0% YoY in March from 2.1% in February, in line with both the market consensus and our forecast. The sharp increase in inflation in March was driven primarily by faster fuel price growth, which rose to 8.6% YoY from -7.8% in February. This factor added 0.9 pp to the annual inflation rate. Such a pronounced rise in fuel price growth was linked mainly to the strong increase in oil prices triggered by the war in Iran and tensions in the Middle East. Headline inflation was also pushed up by faster price growth in the “recreation, sport and culture” category, which increased to 5.1% YoY from 2.4%, due in large part to a marked acceleration in package holiday prices, to 8.6% from 2.9%. This was caused chiefly by a sharp increase in price growth in the “package holidays abroad” category, to 11.7% from 3.7%, driven by a low base effect from last year. We expect that the outbreak of the conflict in the Middle East and the associated increase in transport costs, amplified by the weaker PLN, will push up price growth in this category in the coming months (see MACROpuls of 13/03/2026).

Inflationary pressures remain moderate

Annual price growth in the “food and non-alcoholic beverages” category eased to 2.1% YoY in March from 2.4% in February. This was driven by lower price growth in the following categories: “sugar, confectionery and desserts” (primarily due to slower chocolate price growth), “vegetables” (largely reflecting a decline in cucumber prices), “oils and fats” (due to lower vegetable oil prices), and “non-alcoholic beverages” (reflecting lower coffee prices). According to our estimates, core inflation excluding food and energy prices stood at around 2.7% YoY in March, close to the Monetary Policy Council’s target of 2.5% and above the level recorded in February (2.5%). Core inflation data points to continued moderate inflationary pressures, which will intensify in the coming months as the impact of higher energy prices on core goods and services becomes more pronounced.

Inflation to remain on an upward trend until December this year

We maintain our short-term scenario, under which inflation will remain on an upward trend in the coming months and reach a local peak of 4.1% in December this year. Factors pushing inflation higher will include faster fuel price growth triggered by the conflict in the Middle East, as well as lagged second-round effects of higher energy commodity prices, reflected in faster food price growth and higher core inflation. Intervention in the fuel market, through lower excise duty, lower VAT and a price cap, will smooth the inflation path through the end of 2027, which will mean inflation remaining above the upper bound of the deviation band around the NBP inflation target (2.5% +/- 1 pp) from Q4 2026 to Q4 2027. Our expected inflation path for 2026-2027 is consistent with our forecast of unchanged NBP interest rates through the end of 2027.

Today’s March inflation data is neutral for the PLN exchange rate and yields on Polish bonds.