Polish CPI expanded 10.8% y/y in July (chart), data from Poland’s statistical office GUS showed on August 14.

The reading, which came in line with the flash estimate published by GUS in late July, showed the y/y inflation eased 0.7pp in comparison to June. The CPI index remains elevated very clearly above the National Bank of Poland’s (NBP’s) target of 1.5%-3.5% but appears firmly on track to fall to single digits before the end of the year. 

Falling inflation is expected to push the NBP to execute a first interest rate cut in nearly three years, possibly as soon as September or October. Polish interest rates have been at 6.75%, a two-decade high, since September last year.  

The July CPI reading also suggests a further slowdown in the core inflation growth rate, which, analysts say, eased to around 11.1% from 11.5% y/y in June.

Prices in the most-weighted food and non-alcoholic drinks segment drove the easing of the index in July, the breakdown of GUS data showed. 

While expanding a considerable 15.6% y/y in July, food price growth still eased in the sixth month after a gain of 17.8% y/y in June.

Price growth also eased in the second most-weighted segment of housing and energy, growing 13.8% y/y in July after an increase of 14.6% y/y in June.

Transport prices fell 8.5% y/y in the seventh month after decreasing 9.7% y/y in June, GUS data also showed.

In m/m terms, the CPI slid 0.2% in July after no change the preceding month.

“Our current inflation forecast for August remains at the threshold of 10% y/y,” PKO BP said in a comment on GUS data. 

“Breaking below this level is, in the context of statements from … the NBP one of the two conditions for initiating rate cuts. We acknowledge the upward risk from fuel prices and the downside risk from food prices,” PKO BP added.