Poland’s final inflation reading for May came in at 4.0% year-on-year, slightly below the initial estimate of 4.1%. On a monthly basis, inflation stood at -0.2%, in line with earlier forecasts.
This year’s inflation trajectory is shaping up to be significantly lower than previously anticipated. Disinflationary processes are gaining momentum—falling fuel prices had the strongest downward impact on the overall pace of price growth in May.
The decline in inflation is now so pronounced that summer readings may fall within the upper range of the National Bank of Poland’s inflation target (2.5% with a +/-1 percentage point tolerance band). Contributing factors include a substantial reduction in gas tariffs starting in July, as well as base effects tied to last year’s partial unfreezing of energy prices.
Just two weeks ago, markets were pricing in a July interest rate cut as the base-case scenario, especially given the favorable macroeconomic data. However, the outcome of the presidential election has triggered concerns among members of the Monetary Policy Council (RPP) over the potential lack of fiscal consolidation.
The direction of future monetary policy will likely become clearer following the July release of the NBP’s inflation projection and a press conference by NBP President Adam Glapiński. These events are expected to provide crucial insights into the outlook for interest rates in Poland.
Author: Jan Karczewski, Director of Strategic Clients, Michael / Ström Brokerage House
Source: CEO.com.pl – “Inflation in Poland Lower Than Expected in May: Final Reading at 4.0%”
