Key Moments
- Poland’s October flash CPI slowed to 3.5% year-on-year from 4.1% in September, below consensus expectations of 3.7%.
- Seasonally adjusted prices fell 0.3% month-on-month, driven largely by a 9.7% monthly drop in passenger fuel prices linked to temporary tax cuts.
- Commerzbank expects the softer inflation reading to delay National Bank of Poland tightening and sees PLN underperforming amid ongoing uncertainty.
Headline Inflation Cools, But Signal Deemed Misleading
Commerzbank analyst Tatha Ghose highlights that Poland’s flash Consumer Price Index (CPI) for October showed a notable deceleration. Headline inflation eased to 3.5% year-on-year, down from 4.1% in September, compared with a consensus forecast of 3.7% year-on-year.
On the bank’s preferred seasonally adjusted measure, the price level declined by 0.3% month-on-month. Ghose argues that, while this result is likely to postpone monetary tightening by the National Bank of Poland (NBP), it sends a distorted message about the true inflation backdrop.
Fuel Tax Cuts Drive CPI Drop
According to Ghose, the apparent improvement in inflation is largely attributable to temporary tax measures impacting fuel prices rather than a broad-based easing of price pressures.
“Further to our recent commentary on Poland’s central banking outlook, October’s flash CPI estimate came in weaker than expected on Friday: headline inflation slowed to 3.5% y/y from 4.1% y/y in September (a deceleration to 3.7% y/y was the consensus expectation). On our preferred seasonally-adjusted basis, the price level declined by 0.3% m/m. This will probably delay monetary tightening by Poland’s National Bank (NBP), but the reading is highly misleading as a signal of underlying inflation dynamics.”
“Passenger fuel prices fell by 9.7% m/m as a result, reducing their estimated contribution to annual inflation by 0.8 percentage points. This was not genuine disinflation, but a temporary tax intervention which is currently scheduled to expire at year-end (although likely to be extended).”
| Indicator | Latest Reading | Previous | Consensus (if stated) |
|---|---|---|---|
| Headline CPI (y/y) | 3.5% | 4.1% | 3.7% |
| Seasonally adjusted CPI (m/m) | -0.3% | Not stated | Not stated |
| Passenger fuel prices (m/m) | -9.7% | Not stated | Not stated |
| Estimated contribution of fuel to annual CPI | -0.8 percentage points | Not stated | Not stated |
Policy Outlook and Central Bank Stance
Ghose notes that the weaker data will likely provide cover for the NBP to keep its policy rate unchanged at the upcoming meeting.
“The softer estimated core reading will give NBP a justification to remain on hold at this week’s meeting (Wednesday). But the underlying macroeconomic picture does not negate the case for tightening.”
Zloty Expected to Lag Peers
Despite the downside surprise in the inflation figures, Commerzbank does not view the development as supportive for the Polish currency.
“In our view, the zloty will continue to underperform because of political and central bank uncertainty – this apparent positive inflation surprise will not help.”
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