Polish CPI grew 6.5% y/y in October (chart), marginally below the consensus line of 6.6% y/y and 1.7pp below the September reading, a flash estimate from Poland’s statistical office GUS showed on October 31.

Analysts now expect the CPI to continue easing in November and December but at a clearly slower rate. “In November, the impact of base effects will be smaller and, additionally, we expect further fuel price increases. Therefore, the decrease in inflation in October was likely the last significant deflationary move,” PKO BP said in a comment.

“Key to the inflation trends at the beginning of 2024 will be administrative decisions such as on VAT on food and the extent of the freeze of electricity and gas prices. We expect an extension of protective measures, which would allow for a decline in CPI inflation towards 4% in the first quarter. In an alternative scenario, CPI inflation in will increase slightly in Q1,” PKO BP added.

The falling inflation rate is supportive of the NBP’s plans for another interest rate cut by the end of the year. The NBP’s rate-setting body is meeting next week on November 7 and there appears to be consensus for a 25bp cut that will take the central bank’s reference interest rate to 5.5% from 6.75% only in August.

Food prices grew 7.9% y/y in October, easing from August’s expansion of 10.3% y/y, the breakdown of the data showed. Energy prices expanded 8.3% y/y in the tenth month, compared to a gain of 9.9% y/y in September. 

Fuel prices decreased 14.4% y/y in October after falling 7% y/y in September, GUS data also showed.

In m/m terms, the CPI added 0.2% in October after easing 0.4% m/m in the eighth month.

Prices of food grew 0.4% m/m in August. In the energy segment, prices increased 0.2% m/m, while falling 14.2% y/y in the fuel segment.