Higher fuel prices push inflation up
In accordance with data published by Statistics Poland, CPI inflation rose to 3.4% YoY in August, from 3.0% in July, running in line with the flash estimate. Inflation was driven up primarily by a faster growth in the prices of “fuels and lubricants for personal transport equipment”, which accelerated to 24.2% YoY from 15.8% in July, reflecting higher global oil prices. This added 0.4 pp to annual inflation. Another factor contributing to the rise in headline inflation was core inflation excluding food and energy prices, which we estimate to have stood at approx. 3.3% YoY in August, up from 3.1% in July. The increase in core inflation was driven primarily by faster price growth in the “recreation, sport and culture” category, and particularly by a marked increase in the pace of growth of prices for “package holidays abroad” compared with July. In our view, stronger price growth in this category was to a large extent connected with higher global fuel prices, which pushed transport costs up. Consequently, core inflation data indicates that second-round effects of the supply shock linked to the conflict in the Middle East, as reflected in higher core prices, remain limited.
Food price deflation deepened in August
Slower growth in the prices of food and non-alcoholic beverages (-0.9% YoY in August vs. -0.4% in July) was an important factor behind inflation decline in August. At the same time, food and non-alcoholic beverage prices expressed in monthly terms fell for the fourth month running (-0.7% MoM in August vs. -0.8% in July). Nonetheless, monthly price growth in this category has returned to its seasonal pattern over the past two months. As in the previous month, the decline in food price inflation was broad-based, with “fruit and nuts” (-4.9% YoY in August vs. -3.4% in July) and “vegetables” (-3.5% vs. -1.9%) making the largest contribution. In the case of fruit, the decline reflected lower citrus fruit prices due to stronger harvests in Southern Europe. For vegetables, the decline was broad-based across products and, given the weak harvests reported by GUS this year, suggests that increased imports are offsetting lower domestic supply.
Inflation to rise above the upper band for deviations from the MPC target
We continue to expect headline inflation to remain above the upper band for deviations from the MPC target (2.5% +/- 1 pp) from September 2026 until Q3 2027, temporarily approaching 5% YoY in December 2026 and then again in mid-2027. Inflation will come under upward pressure in the coming months, driven by higher annual fuel price inflation and the increasingly broad pass-through of the energy shock into core prices. In addition, we continue to expect the energy market shock linked to the conflict in the Middle East to feed through into higher food prices (see MACROmap of 22/06/2026). In our view, higher prices of fertilisers will exert broad-based upward pressure on food prices through higher crop production costs, particularly in H2 2027. Secondly, in the case of some agricultural commodities, the prices are close to their cyclical lows and are likely to rebound soon. The balance of risks to our inflation forecast remains tilted to the upside due to the recent escalation in the Middle East and the related increase in oil and gas prices.
Today’s data on inflation in August is neutral for the PLN and the yields on Polish bonds.
