Polish inflation beats expectations driven by fuel prices
Per the full note source, Polish CPI inflation jumped to 3.4% y/y in August, well above the market consensus of 3.1%, with fuel costs the primary driver. However, the desk cautions that the statistical office may not have fully captured the temporary VAT cut on fuel, suggesting the actual pace may be overstated. Core inflation is estimated to have ticked up to 3.2–3.3%, while food prices fell deeper into deflation. The National Bank of Poland is likely to hold rates steady, keeping the zloty supported. With no major domestic data on the calendar, the next key test is the central bank's communication in the coming weeks.
What the desk is arguing
The desk argues that the August CPI print is a temporary fuel-driven spike, not a signal of broad-based reflation. According to the ING economists, the 3.4% y/y reading — up from 3.0% in July and beating both their forecast and the market consensus of 3.1% — was almost entirely due to fuel prices accelerating to 24.2% y/y from 15.8% a month earlier.
The desk posits that the surprise may be overstated, as Statistics Poland likely did not fully capture the impact of the temporary VAT cut on fuel introduced in the second half of August. Core inflation, which excludes food and energy, is estimated to have edged up only slightly to 3.2–3.3% y/y from 3.1%, while food prices fell to -0.9% y/y, reflecting a supermarket price war.
The alternative read — that inflation is re-accelerating — is implicitly rejected. The desk emphasizes the temporary nature of the fuel shock and the persistence of deflationary food trends, which should keep the National Bank of Poland from tightening policy.
Key takeaways
- 01Polish CPI inflation accelerated to 3.4% y/y in August, above consensus and ING forecasts, driven by fuel prices.
- 02The VAT cut on fuel in the second half of August may not have been fully captured, suggesting the increase is overstated.
- 03Core inflation remains contained at 3.2–3.3% y/y, with food prices in deflation.
- 04The NBP is expected to hold rates steady given the transitory nature of the shock.
Market implications
Watch EUR/PLN for a muted reaction to the inflation overshoot, as markets focus on the transitory nature of the fuel shock. A decisive break below the 4.26 area would signal renewed zloty strength, but any hawkish surprise from the NBP next month could trigger a pullback.
Risks to this view
The call is invalidated if the fuel price spike proves more persistent, or if core inflation surprises higher in the coming months. A sharp escalation in global energy prices, or a significant zloty depreciation, could force the NBP to adopt a more hawkish stance. Conversely, a stronger-than-expected deflationary food trend could pull inflation down faster than anticipated.
Older quick take Quick take Published 10:35 Poland Polish inflation beats expectations driven by fuel prices CPI inflation surprised on the upside in August, accelerating to 3.4% from 3.0% in July, driven by higher fuel prices. However, the increase may be overstated, as Poland's statistical office may not have fully captured the impact of a temporary VAT cut on fuel in the second half of the month Krakow, Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Adam Antoniak Senior Economist, Poland Leszek Kasek Senior Economist, Poland Michal Rubaszek Senior Economist, Poland According to Statistics Poland's preliminary estimate, CPI inflation accelerated to 3.4% year-on-year in August from 3.0% in July, well above both our forecast and the market consensus of 3.1%. On a monthly basis, consumer prices rose by 0.4%, above the consensus estimate of 0.1% and following a 0.8% increase in July.
The rise in headline YoY inflation was driven primarily by higher fuel prices, which accelerated to 24.2% from 15.8% a month earlier. The inflationary impact of this factor was not fully offset by the deeper decline in food prices, from -0.4% YoY in July to -0.9% YoY in August. According to our estimates, core inflation, which excludes food and energy prices, edged up to 3.2–3.3% YoY from 3.1% in July.
In the second half of August, the government temporarily reinstated the reduced VAT rate on fuel (8% instead of 23%). However, this was not enough to prevent fuel prices from rising by 5.2% month-on-month and, consequently, did not prevent the acceleration of inflation. That said, the temporary decline in fuel prices in the second half of the month may not have been fully captured by Statistics Poland.
Deflationary trends in the food market persisted in August, supported, among other factors, by a price war between the leading retail chains. We expect inflation to remain elevated over the coming months, close to the upper limit of the National Bank of Poland's target range. As a result, the central bank is likely to leave interest rates unchanged until the end of this year (currently at 3.75%).
However, strong statistical base effects in fuel prices may bring CPI inflation down towards the NBP's 2.5% target around the turn of the first and second quarters of 2027. Together with a favourable inflation outlook for the following quarters, this may prompt the Monetary Policy Council to ease monetary policy in the middle of next year. Our baseline scenario assumes two 25bp interest-rate cuts in 2027.
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