Inflation in Poland stabilized in March at 4.9% year-on-year, according to the just-released flash estimate from the Central Statistical Office (GUS). This marks the third consecutive month that annual inflation has remained unchanged. However, on a monthly basis, prices increased by 0.1%. Some members of the Monetary Policy Council (RPP) have begun suggesting that interest rate cuts may be approaching in the second half of the year.
The biggest issue remains rising food prices, which were 6.7% higher in March compared to a year ago. As a result, this could be the most expensive Easter in history. Spending on traditional holiday items like eggs, dairy, and meat could put significant pressure on household budgets. Coffee prices have also surged, reaching record highs on global markets. Meanwhile, the delayed effect of the cocoa price surge is now being felt in chocolate prices. The average price of a chocolate bar in Poland has already exceeded 7 PLN.
Fuel prices, fortunately, offer some relief—they are currently about 5% lower than a year ago. However, energy prices remain a serious concern, having risen by a staggering 13.3% year-on-year.
Will the RPP React?
A key question now is how the Monetary Policy Council (RPP) will respond to this data, as it is meeting later this week. So far, the Council has kept the main interest rate unchanged at 5.75%. However, internal voices are now emerging that suggest rate cuts may become viable in the second half of the year. This scenario looks increasingly likely, especially if inflation continues to fall in the coming months—it could drop to around 4% by mid-year.
The Global Context
Globally, the actions of the U.S. Federal Reserve (FED) remain crucial. The Fed has currently paused its rate-cutting cycle and is carefully monitoring economic conditions in the U.S. The shift is also tied to the effects of tariffs and trade restrictions introduced by the Donald Trump administration. Any renewed rate cuts by the Fed could influence the RPP’s decisions—lower U.S. interest rates, alongside high rates in Poland, might otherwise cause the Polish złoty to strengthen excessively.
According to the eToro Individual Investor Pulse Survey, inflation remains the top investment risk for Poles—28% of respondents identify it as their primary concern, far ahead of geopolitical threats or the state of the domestic economy. While interest rate cuts would be welcomed by borrowers, they will need to be implemented cautiously to avoid triggering another inflationary spike.
Summary
Inflation in Poland has stabilized, but it remains a challenge, especially amid soaring food prices ahead of Easter. Still, interest rate cuts in the second half of the year are becoming increasingly likely—particularly if inflation continues to ease and global conditions allow for such a move.
Paweł Majtkowski
Analyst at eToro Poland
Source: CEO.com.pl
