Polish Inflation Edges Up to 2.6% in June – Energy Prices to Propel Further Increases

In June, Poland saw a slight uptick in inflation, rising from 2.5% to 2.6% year-on-year, consistent with market expectations. This marks the third consecutive month of inflation growth, driven primarily by a marginal 0.1% increase in consumer prices compared to May. The rise was influenced by a notable 0.7% uptick in food prices, partially offset by a significant 2.8% month-on-month decline in fuel prices.

In July, inflationary pressures are set to intensify beyond the National Bank of Poland’s (NBP) permissible range of deviations, largely due to the anticipated unfreezing of energy prices. The adjustment is expected to elevate consumer inflation by approximately 1.5 percentage points. However, concerns of inflation soaring above 8% year-on-year appear unlikely to materialize. By year-end, inflation dynamics are projected to accelerate to less than 5% year-on-year, peaking in the first quarter of the following year. These conditions suggest that the Monetary Policy Council may consider resuming interest rate cuts only after this peak period.

Core inflation, excluding volatile food and fuel prices, likely stabilized at 3.8% year-on-year in June, following a substantial decline from 12.3% since March of the previous year. The indicator is anticipated to experience a slight acceleration in the latter half of 2024, influenced by strengthening consumer demand and a robust labor market.

The moderate inflationary environment is expected to support a recovery in consumer spending and contribute to a GDP growth rate of around 3% in 2024. This backdrop also favors the Polish zloty, underpinned by positive real interest rates and continued investor interest. According to forecasts, the Polish currency is expected to recover from its recent weakening against major currencies by the end of the year, with projections suggesting approximately PLN 4.25 per euro and PLN 3.85 per dollar.

However, upcoming political developments in Europe pose potential risks. The forthcoming elections in France could introduce volatility, particularly if outcomes favor the National Union, potentially pressuring the złoty towards PLN 4.40 against the euro. In such scenarios of geopolitical uncertainty, traditional safe-haven currencies like the Swiss franc and the US dollar could see increased investor preference.

In summary, while Poland navigates modest inflationary pressures and economic stabilization, external political factors remain pivotal in shaping currency dynamics and investor sentiment moving forward.

In June, Poland saw a slight uptick in inflation, rising from 2.5% to 2.6% year-on-year, consistent with market expectations. This marks the third consecutive month of inflation growth, driven primarily by a marginal 0.1% increase in consumer prices compared to May. The rise was influenced by a notable 0.7% uptick in food prices, partially offset by a significant 2.8% month-on-month decline in fuel prices.

In July, inflationary pressures are set to intensify beyond the National Bank of Poland’s (NBP) permissible range of deviations, largely due to the anticipated unfreezing of energy prices. The adjustment is expected to elevate consumer inflation by approximately 1.5 percentage points. However, concerns of inflation soaring above 8% year-on-year appear unlikely to materialize. By year-end, inflation dynamics are projected to accelerate to less than 5% year-on-year, peaking in the first quarter of the following year. These conditions suggest that the Monetary Policy Council may consider resuming interest rate cuts only after this peak period.

Core inflation, excluding volatile food and fuel prices, likely stabilized at 3.8% year-on-year in June, following a substantial decline from 12.3% since March of the previous year. The indicator is anticipated to experience a slight acceleration in the latter half of 2024, influenced by strengthening consumer demand and a robust labor market.

The moderate inflationary environment is expected to support a recovery in consumer spending and contribute to a GDP growth rate of around 3% in 2024. This backdrop also favors the Polish zloty, underpinned by positive real interest rates and continued investor interest. According to forecasts, the Polish currency is expected to recover from its recent weakening against major currencies by the end of the year, with projections suggesting approximately PLN 4.25 per euro and PLN 3.85 per dollar.

However, upcoming political developments in Europe pose potential risks. The forthcoming elections in France could introduce volatility, particularly if outcomes favor the National Union, potentially pressuring the złoty towards PLN 4.40 against the euro. In such scenarios of geopolitical uncertainty, traditional safe-haven currencies like the Swiss franc and the US dollar could see increased investor preference.

In summary, while Poland navigates modest inflationary pressures and economic stabilization, external political factors remain pivotal in shaping currency dynamics and investor sentiment moving forward.

Implications for Banking and Business

Developments in the Polish banking sector affect businesses operating in the country in several ways. Access to corporate banking services, credit availability, deposit rates, and payment infrastructure are all critical factors for companies — whether established Polish firms or foreign-owned entities entering the market.

For foreign entrepreneurs setting up operations in Poland, choosing the right banking partner is a strategic decision. Major Polish banks including mBank, ING Bank Śląski, Bank Millennium, PKO BP, and Santander Poland offer varying levels of service for international clients, including English-language online banking, multicurrency accounts, and dedicated relationship managers for corporate clients.

The Polish banking market is well-regulated by the KNF (Financial Supervision Authority) and participates in the EU deposit guarantee scheme (BFG — Bank Guarantee Fund), providing deposit protection up to EUR 100,000 per depositor per institution. This regulatory framework provides stability and confidence for businesses maintaining corporate funds in Polish banks.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our VAT and tax advisory, or contact us for a free consultation.