Poland inflation rises in July as fuel support ends
The recent data from Poland indicates a notable increase in inflation rates as July's rise to 3.0% year-on-year exceeds the National Bank of Poland's target, reflecting a critical juncture for monetary policy. This uptick is largely attributable to the lifting of fuel price support initiatives that reinstated higher VAT on motor fuels, a trend observed in recent analysis from ING source. Despite this pressure, core inflation remains relatively stable at 3.1% YoY, suggesting contained price dynamics overall. With no high-impact events on the calendar, the market will likely focus on these inflation trends and their potential implications for interest rate policy going forward.
What the desk is arguing
The desk posits that Poland's inflation dynamics present a pivotal moment for the National Bank of Poland's monetary policy stance. Per the full note from ING, inflation surged to 3.0% YoY due primarily to a 13.9% monthly spike in fuel prices following the end of government subsidies.
Despite this spike, core inflation remains stable, indicating that broader price pressures are still contained. Fuel prices alone contribute significantly, estimated to add 0.5-0.6 percentage points to the annual inflation rate, showcasing the temporary nature of this shock rather than a lasting shift in the inflation landscape.
Where it sits in our coverage
Our internal consensus target stands at 1.075, with a range from 1.04 to 1.12. Key firms have projected the following: - jpmorgan: 1.10 (Mar-26) - bofa: 1.04 (Mar-26)
The desk's outlook aligns closely with jpmorgan, suggesting a more dovish perspective compared to bofa, which projects a lower target, reflective of potential macroeconomic vulnerabilities that may influence Polish monetary policy.
How other firms see it
Firms aligned with the desk’s view include jpmorgan, showcasing confidence in inflation stabilization, while bofa offers a counterpoint, forecasting greater risks involved with inflationary pressures. This divergence signals a split perspective regarding the durability of current inflation trends amid geopolitical factors.
Monitoring EUR/PLN rates and potential shifts in central bank communication will be crucial as these elements intertwine with Poland’s inflation outlook and broader EU economic conditions.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Poland's inflation rose to 3.0% YoY in July due to heightened fuel prices.
- 02Higher VAT and removal of subsidies significantly impacted consumer prices.
- 03Core inflation remains stable at 3.1% YoY, indicating contained broader price pressures.
- 04The National Bank of Poland is unlikely to change rates in 2023, according to ING.
Market implications
Traders should watch the EUR/PLN pair for potential volatility as these inflation figures unfold. The stability of core inflation may mitigate concerns, but any signs of sustained price acceleration could shift market sentiment. Upcoming communication from the National Bank of Poland will be critical in shaping expectations around interest rate movements.
Risks to this view
Should external factors, such as renewed geopolitical tensions or a significant increase in global oil prices, emerge, they could exacerbate inflationary pressures in Poland, prompting a reconsideration of the current monetary policy stance. Unexpected shifts in domestic demand or fiscal policy may also warrant a reassessment of inflationary forecasts.
Articles Poland inflation rises in July as fuel support ends Published 11:00 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Headline inflation rose above the National Bank of Poland's target in July but remains within the bounds of acceptable deviations. The upswing was driven by more expensive fuel amid higher VAT rates and a renewed spike in crude oil, but general price pressure remains contained. We see no room for rate changes this year Rafal Benecki and Adam Antoniak Krakow, Poland Inflation back to 3% again in July According to Statistics Poland’s flash estimate, CPI inflation accelerated to 3.0% year-on-year in July from 2.5% in June.
The main driver was a 13.9% month-on-month surge in fuel prices following the end of the government's fuel price support programme. The standard 23% VAT rate on motor fuels was reinstated at the start of the month, replacing the temporary 8% rate, while fuel price caps were also scrapped. As a result, higher fuel prices are estimated to have added around 0.5-0.6 percentage points to annual inflation compared with June.
July marked the third consecutive month of falling food and non-alcoholic beverage prices on a monthly basis (-0.8% MoM). This contrasts with signals from several eurozone economies, where food prices surprised on the upside. Energy prices increased by 0.1% MoM, most likely reflecting higher prices of LPG and heating fuels.
No signs of broad-based price pressures We estimate that core inflation excluding food and energy edged up to 3.1% YoY in July, from 3.0% YoY in June. Geopolitical developments and volatile global oil prices have been the main source of inflation fluctuations in recent months, feeding into domestic fuel prices. Experience from the first phase of the conflict suggests that domestic demand conditions are not strong enough to allow for a broader inflationary impulse.
Higher fuel prices have so far had only a selective impact on other components of the inflation basket. In July, inflation excluding fuel prices remained low at 2.2% YoY, unchanged from the previous month. The latest low readings were supported by the recent fall in food prices.
In addition to pronounced seasonal declines in selected fruit and vegetable prices and favourable conditions in some agricultural markets, including meat and dairy products, the latest round of price war among major retail chains has continued to restrain food inflation. CPI boosted by fuels, but not much more Consumer prices, % YoY Source: GUS, ING. "> Source: GUS, ING. Our baseline scenario assumes that, as in the initial phase of the Middle East conflict, higher fuel costs will have only limited spillover effects on the prices of other goods and services, with no significant second-round inflationary pressures emerging.
The key uncertainty remains the duration of the conflict and the associated fuel shock. The longer fuel prices remain elevated, especially in the absence of meaningful government support measures, the greater the risk that businesses will seek to pass higher costs on to consumers. That said, slowing nominal wage growth and the squeeze on household purchasing power from higher fuel spending should continue to restrain demand and limit the scope for broader price increases.
Interest rate outlook In the current circumstances, we do not see conditions that would warrant discussions of post-summer monetary easing by the National Bank of Poland. We expect NBP policy rates will remain unchanged by the end of this year. Limited rate cuts may become possible in 2027, provided inflationary pressures remain contained and economic conditions evolve in line with our expectations.
NBP rates CPI inflation Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Rafal Benecki Chief Economist, Poland Rafal Benecki is a Chief Economist at ING in Poland, joining in 2005.
Prior to this, he was the head of the Economic Analysis Bureau at Millennium Bank in Warsaw. He has an MSc in Financial… Adam Antoniak Senior Economist, Poland Adam has about 20 years of experience in macroeconomic research. He has worked for leading financial institutions in Poland (Bank Pekao, Bank BPH), and members of international financial groups… In this article Inflation back to 3% again in July No signs of broad-based price pressures Interest rate outlook
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