Poland’s consumer price index (CPI) grew 4.9% year on year in February (chart), the same expansion rate as the heavily revised – due to the annual changes in the inflation basket – gain of 4.9% y/y the preceding month, data from the country’s statistical office GUS showed on March 14.

Inflation remains conspicuously above the National Bank of Poland’s (NBP) target range of 1.5%-3.5%, dimming prospects for any monetary easing before mid-2025, analysts say. The NBP’s key interest rate has stood at a two-decade high of 5.75% since October 2023.

The NBP’s most recent inflation projection for 2025 and 2026 suggests the central bank will be even more cautious in administering cuts despite political pressure to start a new easing cycle, which would encourage investment.

In February, goods prices surged 4.3% y/y, marking the third consecutive month of acceleration, the breakdown of GUS data showed. The catalyst behind this uptick was higher prices of food and non-alcoholic beverages, their prices picking up the annual growth rate to 6.2% from 5.5% y/y in January, the highest pace since November 2023.

Rising excise taxes, continuing the trend from January, boosted alcoholic beverage prices, with the annual increase climbing to 5.1% in February compared to 4.3% y/y, GUS data also showed. Fuel prices slid 2.6% y/y, marking a return to negative momentum. 

Meanwhile, service prices recorded a 6.6% y/y rise – slightly below January’s 6.8% y/y surge. In that category, culture and recreation prices picked up growth to 5% y/y in the second month, adding 0.8pp to the January reading.

Estimates suggest that core inflation, which strips out prices of food and energy, eased to 3.9% y/y in February from 4% y/y the preceding month, although these figures are subject to a higher margin of error amid ongoing revisions to the inflation basket.

“The lower-than-expected inflation reading for February slightly adjusts the inflation trajectory for the year but does not significantly alter its overall path. We expect CPI inflation to peak in March at just above 5% y/y before gradually declining in the following months,” Millennium Bank said in a comment.

“However, starting in August, inflation is likely to edge up again, driven in part by the reinstatement of the [energy generation] capacity fee and the potential unfreezing of household electricity prices. Electricity price controls remain one of the biggest uncertainties for inflation from October onward,” Bank Millennium also said.

Analysts expect inflation to remain elevated throughout 2025 - but on a lower level than expected after the initial January reading, which came in at 5.3% y/y.

“A downward trend in inflation is expected to begin in April, bringing it within the central bank's target range in the second half of the year – potentially as early as July, provided oil prices remain relatively low and the złoty stays strong,” Santander Bank Polska said.

“Lower-than-expected inflation at the start of the year is a positive development that could intensify discussions [in the NBP] on easing monetary policy. However, we still do not expect the first rate cut to happen before the presidential election, which is why we anticipate it will take place in July,” Santander Bank Polska also said.