Polish concumer price inflation (CPI) expanded 6.2% year on year in December (chart), data from Poland’s statistical office GUS showed on January 15.

The reading arrived 0.1pp above the flash estimate published by GUS in early January. The inflation rate remains above the National Bank of Poland’s (NBP’s) target of 1.5%-3.5%, with analysts now doubting that the target is within reach in 2024.

“Our forecast for the coming months anticipates a CPI decline to below 3% y/y by March, followed by a rebound to 7% y/y by the year's end. Core inflation is expected to decrease to around 5% y/y and remain there since,” Santander Bank Polska said in a comment.

The rebound later in 2024 will result from the end of measures currently in place, lowering VAT on basic foods and freezing energy prices for households. The measures end on June 30 unless the government decides to extend them – currently is not subject to debate.

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

Expanding 6% y/y in December, food price growth eased in the twelfth month after a gain of 7.3% y/y in November.

Price growth accelerated in the second most-weighted segment of housing and energy, growing 9.2% y/y in December after an increase of 8.1% y/y the preceding month.

Transport saw prices fall 2.8% y/y in December after a decrease of 2.2% y/y the preceding month, GUS data also showed. 

Prices in another major segment, culture and recreation, added 5.5% in December following a gain of 6.5% y/y in November.

In month-on-month terms, the CPI inched up 0.1% in December after adding 0.7 m/m the preceding month.

The December CPI reading hints at Poland’s core inflation eased to 6.8% y/y in the twelfth month from 7.3% y/y in November, PKO BP said in a comment.

Inflation’s current easing run is not big enough for the NBP to consider a new rate cut soon.

After aggressive rate cuts in September and October, the NBP is expected to adopt a wait-and-see approach until March at least – which is when the central bank’s new inflation and GDP projection will be released.

The NBP’s reference interest rate is currently at 5.75% after combined cuts of 100bp carried out in September and October.