Economic news

• DATA: In June, wages rose by 9.0% yoy and 2.4% mom, beating market expectations (8.6% yoy and 2.1% mom). Employment declined by 0.8% yoy, in line with forecasts, and remained flat mom. Industrial production fell by 0.1% yoy and 1.1% mom, missing market expectations for a 1.4% yoy and 0.3% mom increase. Construction and assembly output also surprised to the upside, increasing by 2.2% yoy and 10.3% mom (consensus: -1.2% yoy and 7.0% mom). A more detailed outlook on these data will be published soon in our flash comments.
• RATING: Without additional fiscal consolidation, stabilizing Poland’s general government debt in comparison with its rating peers will be challenging, analysts at Fitch Ratings assessed. The agency recently revised its 2025 general government deficit forecast for Poland upwards to 6.6% GDP.
• NBP REPORT: In Q2 2025, the current business conditions indicator recorded a slight decline, remaining at a low level, according to the cyclical survey-based report NBP Quick Monitoring: Analysis of the Corporate Sector Situation. A decrease in the indicator and its persistently low level were observed across the majority of enterprise classes analyzed. Meanwhile, the share of companies reporting wage pressure dropped noticeably in Q2 2025, falling below the long-term median. Enterprises’ expectations for CPI inflation over the next 12 months also declined. Public-sector firms expressed optimism regarding investment prospects, while investment sentiment among private firms remained subdued.
• INFLATION: Final CPI data indicate that inflation stood at 4.1% year-on-year and 0.1% month-on-month in June. The increase was primarily driven by services (+6.3% yoy), particularly in recreation, food services, and accommodation. Goods prices rose at a slower pace (+3.2% yoy), with some categories (such as clothing, footwear, and transport) recording price declines. This one-off deviation does not alter the prevailing disinflationary trend in core inflation. CPI inflation in July may fall below 3%, approaching the NBP’s inflation target. Meanwhile, MPC member Joanna Tyrowicz described price developments in Poland as “fundamentally unstable,” pointing to the uneven pace of price changes across CPI components. See our last week’s commentary for further inflation analysis.
• CORE INFLATION: According to the National Bank of Poland, core inflation (excluding food and energy prices) accelerated to 3.4% yoy in June, up from 3.3% in May. The acceleration appears to be driven by isolated price increases in a few service categories (notably telecommunications, internet services, and airfares), which tend to exhibit random volatility. Other categories generally contributed to the ongoing downward trend in core inflation.
• NATIONAL RECOVERY PLAN: Poland is set to submit the sixth and seventh payment requests under the National Recovery Plan to the European Commission at the turn of the year, with a combined value of PLN 61 billion, according to Katarzyna Pełczyńska-Nałęcz, Minister for EU Funds. She also noted that a transfer of PLN 26 billion related to the two previous requests is expected to be paid out in the autumn.
• GOVERMENT FORECASTS: The government has approved updated macroeconomic projections for the years 2025–2029. This year, GDP is expected to grow by 3.4%, with inflation at 3.7%. In 2026, economic growth is forecasted to reach 3.5%, while inflation is projected at 3.0%. A significant rebound in investment is anticipated in 2026 (+8.0%), supported by robust disbursement of KPO funds. Positive momentum is also expected in the labor market, with real wage growth forecasted at 3.3%.
• BUDGET: According to Ministry of Finance estimates, the state budget deficit stood at PLN 119.7 billion at the end of June 2025, up from PLN 108.3 billion in May. As of end-June, revenues amounted to PLN 264.3 billion, while expenditures reached PLN 383.9 billion. Moreover, the Ministry of Finance reported that 82% of the gross borrowing needs of the state budget for 2025 have already been financed.
• BALANCE OF PAYMENTS: Poland’s balance of payments data for May surprised to the downside, with the current account and trade balance both posting significantly higher deficits than expected (EUR 1.74 billion and EUR 1.44 billion, respectively). The widening of the deficit was driven by import-intensive private consumption, currently the main driver of Poland’s GDP growth, as evidenced by increased imports of consumer goods. According to the NBP, arms deliveries also had a material impact on the increase in imports during the period.

Persistent price divergence: a structural feature of Polish inflation

Last week brought three key inflation readings for Poland: the final CPI release from Statistics Poland (GUS), the core inflation estimate from the National Bank of Poland (NBP), and the EU-harmonized HICP figure. Together, they painted a picture of moderating inflation – at least on the surface. But the Monetary Policy Council has issued a cautionary signal: declaring inflation "under control" without considering the dispersion in price dynamics across categories may be dangerously premature. One of the Council members argued that even if headline CPI inflation averages 2.5% yoy in the coming months, precisely the National Bank of Poland’s inflation target, that alone cannot be taken as proof of price stability. This is particularly so, if:

• Only a small portion of the consumer basket is actually increasing at the target pace of 2.5% yoy.
• A relatively large share is rising much faster – in some cases at double-digit rates – but these increases are offset by deep price declines in other categories, which keeps the overall CPI reading in check.

To illustrate the concern: imagine a situation where half the inflation basket is rising at 12.5% yoy and the other half is falling at -8.5% yoy. The average CPI would still show 2.5%, but such a scenario clearly would not reflect price stability in any meaningful sense.

Polish inflation: historically uneven

We decided to take a closer look at how this price dispersion currently manifests itself in Poland. A quick methodological note: Poland’s statistics office (GUS) divides the inflation basket into dozens of categories, each assigned a weight based on household consumption. For instance, in 2025, food and non-alcoholic beverages account for 25.9% of the basket.

We broke down monthly CPI data into three groups:

• Categories rising faster than 2.5% yoy
• Categories rising slower than 2.5% yoy
• Categories with falling prices

What the breakdown shows

Sources: GUS via Macrobond, Pekao Analizy

Our key finding: in past periods when inflation hovered around the NBP target (2007–2013 and 2019–2021), well over half the basket was rising faster than 2.5% yoy. Deflationary items made up a very small portion (typically below 20%). This suggests that high dispersion is not unusual in the Polish context.

But this analysis has a blind spot: the “above-target” group could include categories rising by just 2.6% as well as those surging at 15%. To address this, we performed a second decomposition, this time dividing items into:

• Rapidly rising prices (above 10% yoy)
• Rapidly falling prices (below -5% yoy)
• Items roughly aligned with the inflation target (between -5% and +10% yoy)

Sources: GUS via Macrobond, Pekao Analizy

A familiar pattern

Interestingly, the results closely resemble conditions in late 2008 and early 2009, another period when CPI hovered near the target despite a significant share of the basket experiencing double-digit price growth. What we’re seeing now is not unprecedented: elevated inflation in services and energy is being balanced by falling prices in fuel, clothing, and food categories as well as other goods affected by global supply pressures.

In June, headline CPI came in at 4.1% yoy and 0.1% mom, confirming the preliminary reading. The rise was driven largely by services (+6.3% yoy), especially in recreation, dining, and hospitality. Goods inflation was much weaker at 3.2% yoy, with several categories such as clothing, footwear, and transport recording outright price declines. Importantly, core inflation (excluding food and energy) rose slightly to 3.4% yoy, mainly due to just three categories: airline tickets, internet services, and telecom, all of which have a history of volatile pricing. Without these outliers, core inflation would have continued its downward trend.

Core vs. Headline: the (un)natural reversal returns

Sources: NBP, Pekao Analizy

One important caveat tempers the otherwise encouraging inflation picture. Historically, whenever headline inflation was at or near the NBP’s target, core inflation remained well below 2.5%, allowing the Polish economy to absorb foreign supply shocks more effectively.

That is no longer the case.

Until mid-2023, it was persistently elevated core inflation. Driven in part by wage growth and sticky services pricing, it gave economists the most concern. The partial unfreezing of energy prices in July 2024 pushed headline inflation briefly above core, but this reversal will likely be short-lived. As early as next month, core inflation may again exceed CPI, a structurally unusual scenario for Poland. This highlights a medium-term risk: as long as domestic inflationary pressure remains elevated, even modest external shocks could push CPI back above the 2.5% target.

Final thoughts

Our decomposition, based on relatively broad CPI categories, introduces some statistical “noise” (e.g., food is treated as one group rather than split into bread, dairy, meat, etc.). Still, the broader conclusions remain robust. If anything, using more granular data would sharpen the pattern, not overturn it. So while inflation appears to be heading in the right direction, and headline CPI may soon align with the target, to paraphrase Miłosz: there is no such thing as inflation at target in Poland, only moments that briefly resemble it.

Financial market update

The turn of June and July marked the point at which the zloty reached its peak (at a rate below 3.60 against the U.S. dollar and below 4.24 against the euro) and began to gradually weaken. The current week, however, has a chance to end this depreciating drift and push the zloty towards the technical troughs of the beginning of the month. All this is due to a large package of data from the domestic economy, most of which (industrial and construction production, PPI, labour market) will be known today, and the remaining readings - tomorrow (retail sales, money supply). Investors in the domestic market are thirsty for those new data allowing for fresh bets on the further shape of monetary policy. This is because after numerous changes to the MPC's narrative, which have resulted in a total of 75bp cuts this year, a number of scenarios are now in play, of which another 50bp cut is the most conservative. It is difficult for markets to predict the MPC's further moves, especially as the Council's decisions are unlikely to be determined by the path of inflation - CPI dynamics will have been anchored at the inflation target by the end of the summer. As a result, it is the data from the real economy that may turn out to be crucial: weak performance of manufacturing, unsatisfactory response of the construction industry to the cuts so far, or worrying signals from the labour market (deeper declines in employment) may be interpreted by the markets as an argument for looser monetary policy.