Poland's inflation rises to 3 percent

Inflation in Poland rose significantly in March, but remained below analysts’ expectations. According to a flash estimate by the Central Statistical Office (GUS), the consumer price index rose by 3 percent year-over-year. This put the inflation rate 0.9 percentage points higher than in February, but still below the market consensus of 3.3 percent.

Higher fuel prices were the main driver of the increase. However, the price surge was less severe than many economists had expected. According to PKO BP, this was precisely the key 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-over-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 consumer basket,” the bank explained in a statement.

This shows that while the energy shock triggered by the war in Iran has reached Polish consumer prices, the effect has so far remained limited. In particular, broader second-round effects on other product groups or services are not yet evident.

Inflation also remained within the Polish National Bank’s target range of 1.5 to 3.5 percent in March. From a monetary policy perspective, this is an important benchmark: While price growth has accelerated, it has not yet reached a level that would create immediate pressure to act.

The detailed data for March paint a mixed picture. Prices for food and non-alcoholic beverages rose by 2 percent year-over-year. Energy prices rose by 3.9 percent. The increase was particularly pronounced for fuels, which were 8.5 percent more expensive than a year ago. On a month-over-month basis, consumer prices rose by 1 percent overall.

Analysts expect a slight decline in inflation again for April. Government interventions in the fuel market, through which the government is attempting to curb price pressures, are 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 is sensitive to developments in the Middle East conflict as well as changes in the domestic fuel market,” wrote PKO BP.

Thus, the future course of inflation remains closely tied to the development of energy prices. Should the situation in the Middle East calm down and the oil market ease, price pressures in Poland could also ease more quickly than recently feared. Conversely, further escalation would increase the risk of new inflationary spikes.

There is much to suggest that the Polish central bank should stick to its wait-and-see stance for the time being. As long as the situation on the energy markets remains volatile, the central bank is likely to have little interest in committing to a new interest rate path prematurely.

According to PKO BP, the lower-than-expected rise in inflation in March could leave the door open for another rate cut later this year—but only if the geopolitical situation eases.

“In the event of de-escalation, the lower-than-expected rise in inflation in March would increase the likelihood of a 25-basis-point rate cut later this year,” the bank said.

The Polish National Bank’s benchmark interest rate currently stands at 3.75 percent. This follows six rate cuts in 2025 totaling 175 basis points, as well as a further cut in March.