In September, inflation in Poland remained unchanged from August at 2.9%. Contrary to forecasts, it did not rise above 3%, but neither did it decline. It therefore stays at the upper end of the central bank’s inflation target range, making next week’s decision by the Monetary Policy Council (MPC) on interest rates a difficult one. While National Bank of Poland (NBP) projections point to inflation rising again toward year-end, the president has signed a bill freezing energy prices until December, which should help curb price pressures. In this situation, the MPC may still opt for a rate cut. The decision will be announced on Wednesday, October 8.
Inflation Stable Against Expectations
The flash estimate of CPI inflation in September came in at 2.9% year-on-year, identical to August. This indicates price stability, even though economists had expected a slight rebound to 3.0–3.1%. Monthly data also surprised, with the market consensus pointing to a 0.2% increase, while the Central Statistical Office (GUS) recorded exactly 0.0%. This shows that short-term price pressures have clearly weakened, easing concerns about accelerating inflation.
In September, food prices fell by 0.5% compared to August, helping to keep the overall price level flat. On an annual basis, however, food and non-alcoholic beverages still rose strongly, up 4.2%—well above the headline inflation rate. Meanwhile, energy carriers were 2.4% higher year-on-year. A low base effect from last year also limited any potential rebound in inflation.
Risks of Inflation Returning
This does not mean the inflation challenge is over. According to the latest NBP projections, inflation is expected to rise again in the final months of the year. The main drivers are higher energy costs, rising service prices, and a possible rebound in food prices. Forecasts suggest CPI could again exceed 3% and approach the upper bound of the tolerance range. This creates a dilemma for the MPC: how to set monetary policy when short-term data show stability, but medium-term forecasts warn of renewed upward pressure.
October Rate Cut on the Table
Against this backdrop, a rate cut at the October MPC meeting appears likely. On one hand, GUS data provide room for a modest easing of monetary policy, perhaps a 25-basis-point cut. On the other, inflation projections point to a possible return of price pressures. A key factor is the extension of the energy price freeze until year-end, which rules out a sharp inflation jump from energy costs.
It is also worth noting that the MPC has often acted unpredictably in the past—cutting rates despite forecasts of rising inflation, and holding off on cuts when prices were expected to fall. This unpredictability makes the upcoming meeting one of the most important of the year. The final decision will depend largely on how the Council interprets risks facing the Polish economy in the quarters ahead.
Source: CEO.com.pl
