The end of fuel market intervention pushed up inflation
According to Statistics Poland (GUS), CPI inflation rose to 4.1% YoY in September from 3.4% in August, above the flash estimate (4.0%). The main driver was an acceleration in price growth in the “fuels and lubricants for personal transport equipment” category to 36.1% YoY from 24.2% in August, reflecting the expiry of the government's intervention in the retail fuel market. This added 0.6 pp to the annual inflation rate. Headline inflation was also pushed up by faster growth in energy carrier prices, to 4.9% YoY in September from 4.1% in August, reflecting higher heating fuel prices. Partly offsetting these effects was a decline in core inflation excluding food, fuel and energy carrier prices, which, according to our estimates, eased to 3.2% YoY in September from 3.3% in August.
The fall in core inflation was driven primarily by slower price growth in the “recreation, sport and culture” category, particularly for “package holidays abroad”. The decline in core inflation in September supports the view that the pass-through of the energy shock linked to the conflict in the Middle East to other prices in the economy remains limited for now.
Food price deflation eased in September
A smaller annual decline in prices of “food and non-alcoholic beverages” also contributed to higher inflation in September (-0.4% YoY compared with -0.9% in August). Prices rose by 0.1% month on month in September, following a 0.7% decline in August. The September increase was below the seasonal norm of approx. 0.3%. The slower annual decline in food and non-alcoholic beverage prices was driven mainly by smaller falls in fruit prices (-2.6% YoY vs. -4.9%) and vegetable prices (-0.3% vs. -3.5%). Poor domestic fruit and vegetable harvests this year have contributed to the slower price declines, although increased imports have partly offset this effect. Price pressures in other food categories generally remain subdued. However, we expect them to intensify in the coming months. This will reflect, among other factors, the delayed impact of the shock in fertiliser and energy carrier markets on food prices.
Renewed fuel market intervention will temporarily lower inflation
On 3 October, the government relaunched the “Lower Fuel Prices” programme, which includes cuts in VAT and excise duty on fuel and an administrative cap on retail fuel prices. The cap is due to remain in force until the end of 2026. We expect the intervention to lead to a decline in fuel prices of more than 10% month on month in October, bringing headline inflation down to 3.3% YoY from 4.1% in September. However, the decline in inflation below the upper bound of the NBP's inflation target tolerance band (3.5%) will be temporary, mainly because we expect core inflation to rise to 3.8% YoY in December 2026. Under our scenario, headline inflation will subsequently remain above 3.5% YoY until Q2 2027, temporarily reaching approx. 4.5% YoY in January 2027.
Should this scenario materialise, it could heighten the MPC’s concerns about the emergence of second-round effects. We therefore continue to expect a single reference rate hike, to 4.00%, in January 2027. At the same time, we believe that, if fuel prices remain elevated, the government will probably extend its intervention in the fuel market throughout Q1 2027, limiting the extent of monetary tightening required.
Today’s data on September inflation are slightly positive for the PLN exchange rate and Polish government bond yields.
