Polish CPI expanded 10.1% y/y in August (chart), data from Poland’s statistical office GUS showed on September 15.

The reading came exactly in line with the flash estimate published by GUS in late August and confirmed the easing of inflation by 0.7pp compared to July. The CPI index remains elevated very clearly above the National Bank of Poland’s (NBP’s) target of 1.5%-3.5% but is now firmly on track to fall to single digits before the end of the year. 

Analysts who had earlier expected inflation to remain close to 10% y/y at the end of 2023 now expect it to hover around the 6% y/y - 7% y/y mark only.

“In September, inflation will almost certainly drop below 9% y/y. The decrease in inflation may continue until the end of the year, reaching below 7% y/y,” Santander Bank Polska said in a comment. 

The caveat to predictions of inflation falling fast in the final quarter of the year is the National Bank of Poland’s unexpected cut of its reference interest rate by as much as 75bp to 6% in early September. 

The NBP’s decision went very much against market consensus, which assumed a cut of just 25bp. 

“In 2024, we assume that the downward trend will no longer persist, and in the second half of the year, there may be some rebound,” Santander Bank Polska said. 

The August CPI reading also suggests a further slowdown in the core inflation growth rate, which, analysts say, eased to around 10% y/y in the eighth month from 10.6% y/y in July.

Prices in the most-weighted food and non-alcoholic drinks segment drove the easing of the index in August, the breakdown of GUS data showed. 

While expanding a considerable 12.7% y/y in August, food price growth still eased in the sixth month after a gain of 15.6% y/y in June.

Food prices going down for several months now is largely the result of a decrease in agricultural production costs and an increase in supply after the pandemic and in response to disruptions in Ukrainian agriculture, analysts say. 

Price growth also eased in the second most-weighted segment of housing and energy, growing 12% y/y in August after an increase of 13.8% y/y in June.

The next most-weighted segment, transport, saw prices fall 1.7% y/y in the eighth month after a decrease of 8.5% y/y in June, GUS data also showed. Prices in culture and recreation added 10.9% in August following a gain of 12.1% y/y the preceding month.

In m/m terms, the CPI did not move in August after sliding 0.2% m/m in July.