This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Interactive chart January’s reading is now slightly below the inflation target of the National Bank of Poland, NBP, set at 2.5%, but remains within the permissible fluctuation band of plus or minus one percentage point. Inflation has been within this range since July last year.
This is the lowest inflation rate since March 2024 (2.0%), though that earlier figure was a one-off. In July 2024 some energy-related support measures were lifted, pushing inflation in the second half of the year to between 4% and 5%. To find a period when inflation was sustainably slightly below the target, one would have to go back as far as 2018 and the first half of 2019.
Above consensus, but a revision lies ahead
Even so, the Statistics Poland (GUS) release came in well above the market consensus of 1.9% year on year. The overshoot was driven mainly by food prices, which rose by 1.3% month on month, and by energy prices, up 1.9% m/m.
The fact that turn-of-the-year data are preliminary matters more than in other months. This is because the weights of the inflation basket are scheduled to be revised in March. As part of this process, the weights are updated to reflect the current structure of household consumption.
Last year’s revision was sizeable. The initial reading for January 2025 was revised down from 5.3% to 4.9%. In previous years, adjustments were smaller and did not exceed 0.2 percentage points.
XYZ’s view
I do not expect the February 13 reading to change much when it comes to the near-term decisions of the Monetary Policy Council (RPP). Disinflationary processes appear to be firmly embedded in the economy.
From the perspective of further monetary easing, the main risk is the economy’s continued strong momentum. On the other hand, the turn of the year and moderate increases in the minimum wage and in the public sector should help to curb wage pressures, which act in a pro-inflationary direction.
Other important factors supporting a decline in inflation include a strong zloty, low global energy prices and deflation in Chinese industry. All of these forces are weighing on the prices of imported goods.
The key reference point will be the March projection from the National Bank of Poland, NBP, which will indicate the expected effects of the interest-rate cuts implemented so far. These effects emerge with a lag and are fully visible only after four to six quarters. It appears likely that the two-month pause in monetary easing will be brought to an end at the March meeting.