PL: Inflation touches 5%, aligns with expectations

The flash estimate for Octobers inflation in Poland stands at 5% year-on-year, in line with both market consensus and our expectations. On a monthly basis, prices increased by 0.3%, with the food and beverages category contributing the most to this monthly dynamic. We anticipate a slight decrease in annual inflation next month due to base effects, finishing the year below the 5% threshold.

Among the consumer basket categories published alongside the flash estimate, the highest monthly increase was observed in the food and beverages sector, at 0.7%, resulting in an annual growth of 4.9%. These figures are marginally higher than our projections; however, we are not revising our near-term forecast just yet. On the other hand, vehicle fuel prices decreased by 2.2% m/m and remained unchanged year-on-year, offsetting the impact of rising food prices. Energy prices, meanwhile, remain elevated at 11.5% y/y (0.3% m/m) due to the significant price increase in July. We foresee another rise in household energy costs in January, though it is expected to be less pronounced than the July increase.

Our near-term outlook for Polish headline inflation suggests a slight decrease to 4.7% in November, due to base effects, with this figure remaining stable in December. Looking ahead to next year, we project inflation to exceed 5%, with an average of approximately 5.3% in the first quarter, depending on the trajectory of energy prices. At the beginning of November, the National Bank of Poland will also release their Inflation and GDP projection.