Poland: Fuel-driven inflation rise contained – ING

ING’s economic analyst Adam Antoniak explains that Poland’s July Consumer Price Index (CPI) increase was primarily driven by higher fuel prices following the removal of VAT normalization and the fuel price cap at the start of July. The restoration of the standard 23% VAT rate from its temporary 8% level and the collapse of the US–Iran Memorandum of Understanding (MoU) contributed to a surge in oil prices, pushing retail petrol and diesel prices up by 15.8% month-over-month in July.

This spike in fuel prices accounted for around 0.5-0.6 percentage points of the overall 3.0% year-over-year CPI increase, which remained within the central bank’s target range of 2.5% ±1 percentage point. Despite the rise in fuel prices, other price pressures in Poland remain subdued. Food price inflation continued to decline, while housing energy inflation eased slightly, indicating lower liquid fuel prices compared to June.

Core inflation, excluding food and energy, edged up by 0.1 percentage point to 3.1% year-over-year in July. Annual inflation in the information and communication category also increased slightly, driven by higher prices for computers, data storage devices, and mobile phone services. The Polish central bank believes that neither the current inflation picture nor the outlook warrants a monetary policy response, as underlying price pressures are contained, supported by moderating wage growth and a cooler labor market.