July saw a noticeable slowdown in inflation. Following June’s consumer price index (CPI) reading of 4.1% year-on-year, the preliminary estimate for July points to a drop to 3.1% YoY—above market expectations, which stood at 2.85%. On a monthly basis, inflation reached 0.3%, also surpassing the consensus forecast of 0.15%.
After many months, inflation has returned to the vicinity of the National Bank of Poland’s (NBP) inflation target, falling within the upper bound of the deviation range (2.5% ± 1 percentage point). Both NBP projections and market expectations suggest that inflation should remain within this band through the end of the year.
The year-on-year decline in inflation is mainly driven by lower fuel prices (down 6.8% YoY), reduced gas tariffs effective from July, and a base effect linked to the partial unfreezing of energy prices in July of last year (energy carriers rose by 2.4% YoY).
The August meeting of the Monetary Policy Council (RPP) will be non-decision-making, meaning that the August inflation reading will be crucial for assessing the future path of interest rate cuts. Any potential rate decisions in Poland could come as early as September.
Author: Jan Karczewski, Director of Strategic Clients, Michael / Ström Brokerage House
Source: CEO.com.pl
