Poland’s Central Statistical Office (GUS) reported that preliminary inflation data for July fell to 3.1 percent year-over-year.
Although much lower than in June (4.1 percent) and within the National Bank of Poland (NBP) target, some were left disappointed, notes Poland’s Business Insider, as the average forecast had called for a decline to 2.8 percent.
A higher increase in fuel prices was most to blame, rising by 3.5 percent versus estimates for a 2 percent increase.
“The decline in inflation in July is not surprising, although we had expected a slightly larger scale of disinflation. We estimate that inflation will decline further in August towards the NBP target, and a relative stabilization of price dynamics is expected in the following months. The higher-than-forecast inflation estimate for July does not change the generally positive disinflation trend,” BI quoted economists at ING Bank Śląski.
According to Bank Pekao economists, inflation in Poland will remain near the inflation target (2.5 percent +/- 1 percentage point) for a longer period of time. They assume it will drop below 3 percent year-over-year by the end of 2025. Bank Pocztowy experts also have a similar forecast, as do those at Bank Ochrony, who wrote:
“We forecast that by the end of 2025, CPI inflation will fluctuate between 2.5 percent and 3.0 percent year-over-year, assuming the frozen electricity prices (at PLN 500 per MWh) are extended until the end of 2025.”
Fuel prices (influenced by oil prices and the dollar) and food prices will be key factors, the portal noted.
Although core inflation data will only be released in two weeks’ time, some economists forecast that core inflation rose in July, which is cause for worry.
“What is most concerning, however, is the persistently higher core inflation – in July it may have even increased to around 3.5 percent year-over-year from 3.4 percent in June. This (would be) the second month in a row when core inflation surprised with a higher reading,” Bank Pekao experts pointed out, adding that this would be even more of a surprise since the momentum of core price growth was in a clear downward trend at the beginning of 2025.
“Together with higher-than-expected wage dynamics readings in recent months, this creates significant inflationary risks for the dovish part of the Council,” they stated.
mBank analysts also suggested that core inflation could have risen, even to around 3.5-3.6 percent, which would mean a regression to the levels seen in March and February. “The rise in core inflation is concerning, especially when combined with the recent slightly higher wage growth,” they posted on X.
Analysts are varied in their opinions about what rate cuts to expect now.
PKO BP analysts are now uncertain about a September rate cut. “From the Monetary Policy Council’s perspective, the sustained return of inflation to the acceptable range of deviations from the target, which began in July, is significant, although in our opinion, this will not be enough to convince the Council to cut rates at its next meeting in September. Our scenario assumes a rate cut only in November, when the next inflation and GDP projection will prove to be the key argument and the details of the 2026 budget will be known, ” wrote PKO BP economists.
According to Citi Handlowy analysts, given the downward inflation trend, the current level of interest rates in Poland is too high. “We expect that further decisions will be made gradually and spread over time. We expect two more cuts of 0.25 percentage points each this year and three more in 2026. This would bring the reference rate down to 3.75 percent,” they wrote.
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