Fuel prices once again fuelled inflation in Poland
Poland’s CPI inflation accelerated to 3.0% yoy in July, as expected, mainly due to a rebound in fuel prices following the expiry of government protective measures and renewed geopolitical tensions pushing oil prices higher. Both headline and core inflation are expected to remain within the 3.0-3.5% yoy range until the end of the year. In this environment, the Monetary Policy Council (MPC) is likely to remain cautious and postpone decisions on further interest rate changes until there is greater clarity regarding the inflation outlook.
After two months of positive inflation surprises, the July CPI reading brought an acceleration in line with expectations. According to the flash estimate, Poland's headline inflation increased to 3.0% yoy from 2.5% in June.
CPI vs. core inflation (% yoy)
Source: Statistics Poland, NBP, Pekao Research
The increase in inflation was primarily driven by fuel prices, which rose by nearly 14% compared to the previous month. This reflected the simultaneous expiry of the government’s fuel anti-inflation programme (“CPN programme”) and a renewed increase in global oil prices amid heightened geopolitical tensions in the Persian Gulf. Recent reports suggest a possible temporary reinstatement of the CPN programme in the second half of August. However, if implemented for such a short period, it is possible that we will not see it in inflation data at all.
Contribution of categories to the acceleration in July inflation (% yoy, pp)
Source: Statistics Poland, Pekao Research
Food prices remain an important factor limiting inflationary pressure. In July, they were more than 0.5% lower than a year earlier, confirming the persistently subdued price pressure in this category. This is supported by relatively low agricultural commodity prices and favourable supply conditions.
The only less positive element remains core inflation, which stayed elevated at around 3.1% yoy. However, higher price growth is concentrated mainly in categories most sensitive to fuel prices, such as transport and package holidays, suggesting that underlying inflationary pressures are not yet broad-based. Excluding fuel prices, inflation remains broadly stable.
CPI excluding fuel prices (% yoy)
Source: Statistics Poland, Pekao Research
By the end of the year, both headline and core inflation are expected to remain within the 3.0-3.5% yoy range, with a gradual upward trend and a local peak around the turn of the year. However, the outlook remains highly dependent on developments in the oil market. The MPC has no rate-setting meeting in August, and another inflation reading will be released ahead of its September meeting. Under the current circumstances, with geopolitical tensions persisting and oil prices remaining elevated, recent dovish signals from NBP President Adam Glapiński regarding the possibility of rate cuts in September appear less relevant. Other MPC members have also adopted a cautious stance.
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