This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Inflation in Poland reached 4% year on year in September, according to Statistics Poland’s flash estimate. That was up from 3.4% in August and above the National Bank of Poland’s inflation target range, whose upper limit is 3.5%.
Interactive chart The increase was driven primarily by fuel prices, which surged by 36.1% year on year in September. This reflects persistently high crude-oil prices amid conflicts in the Middle East. Prices of electricity, gas and other fuels also rose, by 4.9% year on year.
By contrast, prices of food and non-alcoholic beverages fell, although less sharply than in previous months. According to the flash estimate, they declined by 0.5% year on year. This is partly offsetting the impact of high fuel prices on headline inflation.
A small silver lining
The latest inflation data are bad news for the economy, although there are some mitigating factors.
Higher inflation limits real wage growth, which means demand growth may weaken in the coming months. At the same time, companies’ costs will rise. The situation in energy commodity markets also appears likely to remain tight, keeping fuel and energy prices elevated.
Interactive chart One mitigating factor is that core inflation, which excludes energy and food, appears to have edged lower. According to our estimates – the official data will be released in mid-October – it may have fallen slightly to around 3–3.2%. This suggests that, at least for now, the fuel-price shock is not spreading more broadly through the economy. That may, however, reflect high inventories accumulated by companies during the government’s Ceny Paliw Niżej (CPN) fuel-price programme.
The Monetary Policy Council faces a decision
It is difficult to predict exactly where inflation will be over the coming months. If several adverse factors coincide – food prices start rising and energy commodities move somewhat higher than they are today – inflation could reach 5% at the beginning of 2027.
For the Monetary Policy Council, the key issue is the risk of so-called second-round effects: high fuel prices feeding into other prices and then into higher wage demands. That risk is clearly increasing, but will it be enough to prompt rate hikes? Forward-rate agreements are pricing in the possibility that interest rates could rise to as much as 5% by the end of 2027, compared with 3.75% today.
Some bank economists are less hawkish, expecting increases of around 0.5 percentage points, as at ING, or 0.75 percentage points, as at Pekao. Even so, a broader consensus is beginning to emerge that rates are likely to rise.