Poland’s Central Statistical Office (GUS) confirmed today, in its flash estimate, the widely expected year-on-year drop in the Consumer Price Index (CPI). In July, consumer inflation stood at 3.1% year-on-year, down from 4.1% in June. This lower reading was supported by a high base effect from the previous year, when energy prices surged following the partial liberalization of electricity tariffs in July 2024. This July, Polish consumers also benefited from lower natural gas prices, though this was partially offset by an increase in capacity charges on electricity bills. Based on the GUS preliminary estimate, core inflation in July likely remained close to 3.4% year-on-year, similar to June’s level.
Interest Rate Cuts on the Horizon
Although the CPI drop was slightly smaller than forecasted (most median estimates ranged between 2.8%–2.9%), inflation has once again returned to the National Bank of Poland’s (NBP) target range, which allows for deviations of ±1 percentage point from its 2.5% goal. CPI is likely to stay within this band unless new shocks—domestic or global—emerge. In this context, we see room for further interest rate cuts by the Monetary Policy Council (RPP), with the next reduction expected in September.
What Do China’s Policies Have to Do with Polish Inflation?
Currently, the greatest risk to Poland’s disinflation path seems to stem from district heating prices. However, Europe—including Poland—may increasingly feel deflationary pressure from China, which is seeking new export markets amid changes in U.S. trade policy. China’s industrial production capacity exceeds its domestic demand, leading to a growing trade surplus. This surplus, as a percentage of global GDP, is now at a record high. At the same time, China’s Producer Price Index (PPI) is deepening into deflation, meaning that Chinese goods may become even cheaper on world markets.
This potential imported deflation could help slow consumer price growth in Poland even further, easing pressure on households and potentially influencing future monetary policy decisions.
Author: Dawid Pachucki, Director of the Macroeconomic Analysis Office, Chief Economist at PZU
Source: ceo.com.pl
