The Polish consumer price index (CPI) picked up its expansion rate slightly to 5% year on year in October (chart) from 4.9% y/y in September, data from Poland’s statistical office GUS showed on November 15.

The reading is in line with the flash estimate GUS published in late October. The inflation rate continues to linger above the National Bank of Poland’s (NBP’s) target range of 1.5%-3.5%, all but ruling out any monetary policy easing before mid-2025, analysts say. The NBP’s key interest rate has been at a two-decade high of 5.75% since October 2023.

Inflation is accelerating in the wake of growing energy prices after the government phased out some of the pandemic-era price controls in July, triggering price growth across other sectors of the economy.

That said, the pace of price growth eased in October, pointing to some disinflationary pressure evident in the economy, despite persistent inflation of energy and food prices, as well as “rapidly growing wages amid loose fiscal policy,” Bank Millenium said.

As the government is likely not to risk the political fallout of letting energy prices rise further in 2025, the inflation rate is now expected to peak at no more than 6% y/y in March before embarking on an easing path from then on.

Prices of food and non-alcoholic drinks drove the headline figure, accelerating expansion to 4.9% y/y in the tenth month after a gain of 4.7% y/y in September, the breakdown of the data showed. 

Housing and energy price growth also picked up, growing 9.8% y/y - against a gain of 9.7% y/y the preceding month.

Prices in another major segment, culture and recreation expanded by 5.5% y/y in October, increasing the growth rate slightly versus a gain of 5.4% y/y the preceding month, GUS data also showed.

Meanwhile, the transport segment saw prices fall 0.4% y/y in October after a fall of 1.5% y/y the preceding month.

In month-on-month terms, the CPI expanded 0.3% in October after inching up 0.1% in September, GUS data also showed.

The October CPI reading does not change the immediate monetary policy outlook for Poland, according to Bank Millennium.

“The NBP interest rates will remain unchanged at least until March next year, [after which] the CPI index should gradually decline, slowly paving the way for cuts,” Bank Millennium said.

The NBP rate setter also appear ever more likely to worry about the sluggish pace of economic growth rather than inflation, which could bring forward the start of a new easing cycle.

“The room for cuts will be limited, partly due to factors such as continued solid wage growth, low unemployment and loose fiscal policy. We expect the reference rate to reach 4.5%-4.75% by the end of 2025,” Bank Millennium said.