Poland CPI rebound confirms June was the floor
Polish inflation rose from 2.5% to 3.0% YoY in July, matching consensus, while prices increased by 0.8% MoM, slightly above the 0.7% expected.
As we argued in our preview, June’s decline was a temporary floor rather than the beginning of a sustained disinflationary trend. The July rebound confirms that view.
Fuel provided almost all of the upward pressure. Prices at the pump jumped 13.9% MoM following June’s 7.4% decline, lifting annual fuel inflation from 5.3% to 15.8%. By contrast, food prices fell another 0.8% on the month and were 0.4% lower than a year earlier, while household energy prices rose by just 0.1% MoM. The result therefore looks like a concentrated fuel shock rather than evidence of a broad reacceleration in domestic inflation.
Even so, the data strengthen the case for NBP patience. July’s print is consistent with the Bank’s projection for inflation to average around 2.9% this year and peak near 3.2% in the fourth quarter. With the reference rate currently at 3.75%, the rebound makes a September cut harder to justify, especially while energy prices remain uncertain. At the same time, falling food prices and the narrow composition of the increase offer little reason to consider renewed tightening.
This is not a hawkish shock, but it is a reason not to rush into easing.
For PLN, the result is modestly supportive. The annual rate matched expectations, limiting the scope for a large immediate reaction, but the stronger monthly reading and sharp fuel increase reduce the risk that markets interpret June’s softness as a green light for rate cuts. Unless inflation reverses again in August, the NBP is likely to remain on hold into the autumn, preserving the zloty’s rate advantage.