PL: Base effect behind annual inflation jump

Today's flash inflation data reported an annual increase of 4.9%, aligned with market consensus. However, this outcome marginally exceeded our internal forecast by 0.1 percentage points, primarily due to a slight underestimation of the fuel price trajectory. On a monthly basis, consumer prices reported a modest 0.1% increase, showing moderate price growth momentum within the Polish economy. Our projection anticipates broadly stable annual inflation through the remainder of the year, with a slight uptick anticipated in the first quarter of 2025.

A closer examination of the preliminary data reveals that food prices increased by 0.2% m/m (4.7% y/y), a trend mirrored by electricity, gas, and other fuels (0.2% m/m and 11.4% y/y). Conversely, personal transport fuel prices experienced a sharp decrease of 3.4% m/m, resulting in an annual decline of 2%. The relatively significant, but anticipated, surge in annual inflation from 4.3% in August to 4.9% in September is primarily a consequence of base effects. Specifically, the last years introduction of the program providing free medications for young people and seniors has contributed to this upward revision.