The Polish consumer price index (CPI) picked up its expansion rate to 4.3% year on year in August from 4.2% y/y in July, data from Poland’s statistical office GUS showed on September 13.

The reading is in line with the flash estimate GUS published in late August. The inflation rate continues to linger above the National Bank of Poland’s (NBP’s) target range of 1.5%-3.5%. Analysts now expect the CPI to keep growing in the remainder of the year, all but preventing the central bank from cutting rates – currently at their longtime high of 5.75% – this year.

Inflation is accelerating in the wake of growing prices of electricity, gas, and heating after the government phased out the pandemic-era price controls in July.

High wage growth, low unemployment, and the anticipated economic recovery hint at a period of heightened price growth until late 2025, analysts say.

Housing and energy price growth picking up to 9% y/y - against a gain of 8.7% y/y the preceding month -  drove the August headline figure in the first place, analysts say. 

Elsewhere, food prices accelerated expansion to 4.1% y/y in the eighth month after a gain of 3.1% y/y in July. 

Prices in another major segment, culture and recreation expanded by 4.1% y/y in August, increasing the growth rate versus a gain of 3.8% y/y the preceding month, GUS data also showed.

Meanwhile, transport saw prices ease 1.4% y/y in August after a gain of 0.6% y/y in July. Prices in restaurant and hotels increased 7.5% y/y after growing 7.6% y/y the preceding month. 

The core inflation component remained at an estimated 3.7% y/y - 3.8% y/y in August, analysts say. The NBP will publish an official core inflation reading on August 16.

In month-on-month terms, the CPI inched up 0.1% in August after a jump of 1.4% m/m in July.

“In the coming months, inflation will continue to rise, and by the end of the year, the CPI is expected to be around 5% year-on-year. At the start of 2025, inflation will keep increasing, reaching approximately 6% year-on-year due to announced hikes in regulated prices,” Bank Millennium said.

“From April next year, CPI inflation is expected to begin declining, and in our view, it may only approach 3.5% - the upper range of the NBP’s inflation target - in the fourth quarter of 2025,” Bank Millennium also said.

“Our baseline scenario assumes that the first interest rate cut of 25bp will occur in the second quarter of 2025, with a total reduction of 100 basis points throughout the year, bringing rates to 4.75% by the end of 2025,” ING said.

After aggressive rate cuts in September and October last year that left the central bank’s reference interest rate at 5.75%, the NBP has held in each of the rate-setting meetings since.