Poland’s inflation outlook is on the mend, with leading indicators pointing to a positive trajectory for the Polish economy. According to recent Bureau of Labor Statistics data, CPI inflation has fallen to 4.1% YoY as of May. This decline is deeper than the consensus estimate of a 4.3% decline. A variety of external forces have combined to propel this positive trend. A weak US dollar and cheap in global terms commodities have helped take the pressure off prices.
The April figure of CPI inflation in Poland was 4.3% – a sign of declining prices on a month-to-month basis over the course of May. A big factor was the last release’s continued likely core inflation downward trend, which analysts have pointed out. This is important because it arguably indicates that underlying inflationary pressures are softening. This is further proof that the long-awaited, more stable economic environment has taken hold.
The drop at the pump, with gas prices decreasing almost 15% from a year ago, is an important factor in this bright forecast. In addition, Polish households will see a cut in their average gas bills of around 10% from July. These advances are key drivers of the broader decline in the cost of living and help reduce economic stress on American consumers.
Poland’s headline inflation could approach the National Bank of Poland’s target by July, particularly as the influence of a high reference base from July 2024 comes into play. Year-on-year current CPI inflation has fallen from 3.4% to 3.3%. This advance is a demonstration that the nation is heading in the right direction towards its inflation targets.
We call on the Monetary Policy Council (MPC) to build on this positive outlook. During a brief reprieve in June, they intend to restart interest rate cuts. Currently, Poland’s policy rate stands at 5.25%. Economic analysts expect the central bank to approve at least two additional cuts of 25 basis points either in September and November. This further step demonstrates their commitment to fostering strong economic growth while curbing inflation.
These external factors, which have played a major role in shaping today’s disinflationary environment, can not be ignored. The combination of the tonic effect of the weak US dollar has certainly helped, making high cost imports now cheaper, thus helping to suppress domestic price inflation. Along those same lines, the availability of cheap global commodities has taken a lot of inflationary pressure out of the economy.