Polish Inflation Climbs to 3.0% in July, Easing Hopes for Rate Cuts
Inflation Trends and Monetary Policy Outlook
Inflation Rises in Line with Expectations
WARSAW, July 31 (Reuters) - Polish inflation accelerated in July in line with economists' expectations, driven primarily by rising fuel prices, reinforcing the market's belief that interest rates will remain unchanged for now.
Year-on-Year and Month-on-Month Data
• Inflation rose to 3.0% year-on-year, the level expected by analysts polled by Reuters, from 2.5% in June, the statistics office said on Friday based on a flash estimate.
• The month-on-month price growth rate was 0.8%, also in line with market expectations. The main factor that influenced the increase in inflation was the rising price of fuels - 15.8% year on-year and 13.9% month-on-month.
Factors Behind the Inflation Surge
External and Domestic Influences
• The increase was driven by the escalation of the conflict in the Middle East and by the Polish government decision to end a programme that had limited fuel price rises on the domestic market.
Central Bank Response and Market Expectations
Interest Rate Decisions
• The National Bank of Poland left its main interest rate at 3.75% in July for the fourth month in a row and central bank Governor Adam Glapinski said he could propose a 25-basis-point interest rate cut after the summer, though other Monetary Policy Council members could prove more cautious about further monetary easing.
Analyst Commentary
Outlook for Rate Cuts
• "These are not conditions for submitting applications for a NBP rate cut after the summer holidays. We assume that NBP interest rates will remain unchanged this year. Limited cuts are possible in 2027," economists at ING Bank in Warsaw wrote in a commentary.
(Reporting by Pawel Florkiewicz;Editing by Helen Popper)
