Poland's inflation rises to 3 percent

Inflation in Poland rose noticeably in March, but remained below analysts' expectations. According to a flash estimate by the GUS statistics office, the consumer price index rose by 3 percent year-on-year. The inflation rate was therefore 0.9 percentage points higher than in February, but remained below the market consensus of 3.3 percent. The main reason for the increase was higher fuel prices. However, the price surge was less pronounced than many economists had expected. According to PKO BP, this was precisely the decisive reason for the positive surprise in the inflation data. "The lower than expected growth in fuel prices was the main reason for the positive surprise. They rose by 15.4 percent month-on-month instead of the expected 20 percent or more. Food prices also remained below expectations and unchanged. So far, the fuel price shock has not affected other components of the basket of goods," the bank explained in a statement. This shows that although the energy shock triggered by the war in Iran has reached Polish consumer prices, the effect has so far remained limited. In particular, a broader second-round effect on other groups of goods or services is not yet apparent. Inflation also remained within the National Bank of Poland's target corridor of between 1.5% and 3.5% in March. From a monetary policy perspective, this is an important marker: although the price trend has accelerated, it has not yet moved into a range that would generate immediate pressure to act. The detailed data for March show a mixed picture. Prices for food and non-alcoholic beverages rose by 2% year-on-year. Energy prices rose by 3.9%. The increase was particularly marked for fuel, which was 8.5% more expensive than in the previous year. In a monthly comparison, consumer prices rose by 1% overall. Analysts expect inflation to fall slightly again in April. State intervention in the fuel market, with which the government is attempting to curb price pressure, is playing a role here. "A slight decline in consumer price inflation is expected for April, mainly due to the impact of fuel prices. However, the outlook remains uncertain and sensitive to developments in the Middle East conflict as well as changes in the domestic fuel market," PKO BP wrote. This means that the further course of inflation remains closely linked to the development of energy prices. If the situation in the Middle East calms down and the oil market eases, the upward price trend in Poland could also weaken more quickly than recently feared. Conversely, a further escalation would increase the risk of new inflationary surges. There is much to suggest that the Polish central bank should maintain its wait-and-see approach for the time being. As long as the situation on the energy markets remains volatile, the monetary authorities are unlikely to have much interest in committing to a new interest rate path at an early stage. According to PKO BP, the lower than expected rise in inflation in March could keep the door open for a further interest rate cut in the course of the year - but only if the geopolitical situation eases. "In the event of a de-escalation, the lower than expected rise in inflation in March would increase the probability of a rate cut by 25 basis points in the course of this year," the bank said. The National Bank of Poland's reference interest rate currently stands at 3.75 percent. This follows six interest rate cuts in 2025 totaling 175 basis points and a further cut in March. The post Poland's inflation rises to 3 percent appeared first on ostwirtschaft.de.