Inflation continues to slow in Poland, hitting 13-month low of 2.8%

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Poland’s annual inflation rate has slowed to 2.8% in August, its lowest level in over a year, according to a flash estimate by state agency Statistics Poland (GUS).

The reading came in just below the 2.9% forecast, and was down from 3.1% in July. On a month-to-month basis, prices declined by 0.1% from July to August.

According to analysts, the reading suggests it is likely that Poland’s central bank will cut its key interest rate for the third time this year during its rate-setting meeting next week.

The inflation slowdown was driven in particular by fuel prices, which were down 7.7% compared to last August. They also fell 1.9% month-on-month, following a surprise 3.5% year-on-year increase in July.

The growth in food and energy prices, meanwhile, eased slightly to 4.8% year-on-year and 2.3% year-on-year respectively in August, both 0.1 percentage points down from the annual figures in July.

Analysts at ING bank estimate that Poland’s core inflation, which excludes volatile food and energy prices and is seen as a better measure of underlying price pressures, eased to 3.1% year-on-year in August, down from 3.3% in July.

GUS’s August reading means that inflation has now remained within the National Bank of Poland’s (NBP) target tolerance band of 1.5% to 3.5% for two consecutive months.

According to analysts from several Polish banks, this will be sufficient for the central bank’s Monetary Policy Council (RPP) to cut rates at the next meeting in September.

The RPP cut its benchmark interest rates by 25 basis points in July, following a 50 basis point move in May. It currently stands at 5%. Markets widely expect another 25 basis point reduction at the RPP’s meeting next Wednesday.

However, analysts at Alior Bank believe that talk of further rate cuts may become more cautious because the government is planning to keep up heavy spending (generally seen as pro-inflationary), as shown in the draft 2026 budget adopted yesterday.

Prime Minister Donald Tusk welcomed today’s GUS figures, noting that the country is moving past the period of sharply rising prices under the previous Law and Justice (PiS) government, which ruled until December 2023. Inflation reached a peak of over 18% in February 2023.

“Today, we are finally saying goodbye to the PiS-era cost of living crisis,” declared Tusk.

Inflation in Poland started to accelerate in 2021, when the economy opened up after the pandemic-induced lockdowns. Price growth further accelerated in 2022 with the outbreak of war in neighbouring Ukraine, but has slowed sharply since peaking in early 2023.

However, it briefly accelerated again last summer after the Tusk government partially unfroze energy prices. As a result, Poland had the third-highest level of inflation in the EU last August.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: Gosia K/Pexels 

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.