The flash estimate of Poland’s CPI for September surprised slightly to the downside. Consumer prices rose by 2.9% yoy, the same as in August. The reading was slightly lower than market expectations and our own (3.0%). Month-on-month, prices remained unchanged (0.0% mom).

CPI vs. core inflation (% yoy)

Source: Statistics Poland, NBP, Pekao Research

The key information is that the entire surprise was concentrated in food prices, which is all the more confusing, as food is a category that has recently fueled inflationary pressure and its future prospects remain unfavorable. Meanwhile, in September, food and beverage prices fell by 0.5% month-on-month – this is a significantly lower rate than the seasonal pattern of previous years. Based on the flash estimate, we don't know the exact cause of this surprise. For now, we attribute this to higher volatility and the more frequent occurrence of unusual observations in the summer months, particularly in the seasonality of fruit and vegetable prices. To confirm this hypothesis, we will have to wait for the publication of the final reading (mid-October), where we will learn the details of its structure.

Food prices growth (% mom, seasonally adjusted)

Source: Statistics Poland, Pekao Research

Meanwhile, energy prices rose by 0.2% mom in September, likely reflecting the beginning of a series of price hikes for heating energy due to unfreezing of prices at the beginning of the second half of the year. Further increases in this category are expected now, before the start of the heating season.

However, core inflation remains a fly in the ointment. Although it is on a downward trend, its pace is very slow. In September, core inflation decreased slightly, to about 3.1% yoy from 3.2% in the previous month. Services remain under pressure from the high, though also declining, growth in labour costs.

In summary, CPI will remain at its current level at least until the end of this year, remaining below 3% yoy. In October, inflation may continue to stabilize at 2.9%, with a slight decrease possible in November. The average annual CPI inflation in 2025 is projected at 3.7%, similar to 2024.

What will the Monetary Policy Council (MPC) do with this data? The upcoming October decision-meeting promises to be extremely interesting. The lower-than-expected today’s CPI headline figure brings us a bit closer to a rate cut in October, but not its structure. Moreover, Poland president's signature of the bill extending the energy price freezing for households into the fourth quarter also supports a faster rate cut. On the other hand, elevated core inflation, driven by still heightened services inflation and high labor costs, and the MPC's perceived expansionary draft state budget for 2026, warrant caution regarding further monetary policy moves.

It is difficult to clearly assess whether the MPC will cut interest rates already in October based on the above arguments. Although November remains the most likely date for such a move, the possibility of an earlier cut has increased, as has the scale of the reduction by the end of the year. However, we are still leaning towards November, when the Council will receive the NBP analysts' forecast confirming positive inflation trends and will make its final rate cut this year. Further cuts will follow next year.