Economic news

• INFLATION: According to the final estimate, consumer prices (CPI) rose by 4.9% yoy in March. Core inflation (excluding food and energy prices) remained at 3.6% yoy. As a result, the Polish economy has reached the edge of the inflation “plateau” predicted for 1Q25 and should enter the disinflation phase from April (to below 4.5% yoy, about 3% yoy from July). Contrary to forecasts from the beginning of this year, we did not observe an inflation “peak” in March, partly due to the effect of excise tax increases on tobacco products spread over the entire 1Q25. It is also worth noting the movements in fuel prices (-2.0% mom) which are falling due to the global risk of recession associated with lower demand for energy.
• STATE BUDGET: The state budget deficit after 1Q25 amounted to PLN 76.3 bn - informed the Ministry of Finance. The deficit remains on the trajectory from the budget bill - after ¼ of a year, the deficit is around ¼ of the planned annual amount of PLN 289 bn. It is worth noting the satisfactory growth of VAT revenues (11.8% yoy).
• ECONOMIC POLICY: Prime Minister Donald Tusk announced the "reconstruction and repolonization of the national economy, market and capital". The Prime Minister noted that the current times are not conducive to globalization; he also stated that maximizing profits does not necessarily have to be a priority for state-owned companies. In response to this statement, the WIG20 index declined by about 2% during a day.
• MONETARY POLICY: One of the dovish members of the MPC Ireneusz Dąbrowski expressed the view that July is a safe time to decide to cut interest rates, although he did not rule out that such a decision will be taken earlier, as the readiness to ease monetary policy in the MPC has increased. We maintain our opinion that in May and June the MPC will cut rates by a total of 100 bps – in line with the April announcement of the President of the NBP Adam Glapiński.
• GDP: The StatOffice has revised upwards the GDP growth in 4Q24 from 3.2 to 3.4% yoy. The average annual GDP growth, however, did not change (2.9%) due to a slight downward correction of growth in 1Q24 (from 2.2 to 2.1% yoy). The contribution of investment to this result ultimately turned out to be negative - according to the revised data, investment fell by 2.2% last year, while it was previously estimated that they grew by 1.5%. On the other hand, the contribution of the change in inventories was revised upwards. The revised data show that the investment cycle does not differ (contrary to earlier suggestions) from the previous ones.

Inflation in Poland: where are we, where are we going? Four charts that will show the truth

CPI vs. core inflation (% yoy)

Source: Statistics Poland, NBP, Pekao Research

We would like to show what the current, domestic, "real" inflationary pressure in Poland really looks like based on 4 charts:

1 - In the immensity of administered, tax, tariff and other temporary factors (independent of the impact of monetary policy) is very important to determine, what the real domestic inflationary pressure is. As it happens, we have this calculated in our super-core inflation. It constitutes about 35% of the consumer basket, including all categories after excluding: administered prices, the most volatile prices, food and energy prices, and 15% of the categories with the lowest price indices in a given month and 15% with the highest. Such a measure of inflation is a more stable indicator of internal inflationary pressure, becoming resistant in practice to all temporary factors at a given time. 

Core inflation vs. super-core inflation (6MMA, SAAR)

Source: Statistics Poland, NBP, Pekao Research

Inflationary pressure not burdened with temporary factors remains persistently elevated and simply does not want to fall. In annual terms, inflation has remained at around 3.5% since the beginning of 2024. This is mainly due to services inflation and the very slowly translating high labour costs and the closing demand gap with the accelerating Polish economy in 2025.

2 - Inflation divided into its volatility and the pace of adjustment to shocks in the economy. Here, we have divided 290 price categories according to the standard deviation of their growth. Those with the lowest volatility have been called "sticky", those with the highest we have called "flexible". The first group includes categories in which prices are changed the least often. Such inflation is the most difficult to influence, and its movements are slow. Those from the last group, in turn, react to shocks very dynamically, adjusting prices even from month to month.

Inflation broken down by its volatility (% yoy)

Source: Eurostat, Pekao Research

To confirm a lasting disinflationary trend, we would expect a downward trend in "standard" inflation, or even better "sticky" inflation. Nothing like that is happening for now. A rapid decline in inflation in these categories took place in 2023-2024, but 2025 is their flattening out for now.

3 - Another division of inflation that we propose is related to its sensitivity to the domestic economic situation. In short: the disaggregation performed here allowed us to isolate those components of the inflation basket that are sensitive to changes in domestic demand, what the monetary policy has the greatest influence. The conclusions are similar here - to confirm a lasting disinflationary trend, we would need a clear downward trend in inflation sensitive to the domestic economic situation. Nothing like that is happening for now, and the trend is lateral.

Sensitivity of inflation to domestic economic conditions (pp, % yoy)

Source: Eurostat, Pekao Research

4 - Basing on yearly growth is heavily burdened by a high reference base as well as the effects of weight changes in the consumer basket (see the recent example of 2025, where for this reason CPI and core inflation in yearly terms were reduced by 0.4 pp). In such circumstances, it is worth looking at monthly growth to catch the real current inflation momentum, not burdened by what happened a year ago. For this purpose, we divided the seasonally adjusted dynamics (mom) into three groups (those with falling prices, growing between 0% and 0.5% and above 0.5%) and added up their share in the consumer basket.

We can see that the share of the consumer basket of core inflation whose prices are falling was the highest in 2023-2024. Since 4Q24, this share has started to decline. The consolation is that the part of the basket whose prices are growing at a very fast pace (>0.5% mom) is gradually decreasing, falling into the group of goods with a slightly slower growth (up to 0.5% mom).

Share of the consumer basket divided by seasonally adjusted %mom inflation growth (6MMA)

Source: Eurostat, Pekao Research

To sum up, domestic inflationary pressure in Poland is not in a downward trend, remaining at a constant, elevated level in recent months. Achieving the inflation target permanently is still a long way off and will not happen before the first half of 2026. Therefore, we see a considerable probability that after adjusting interest rates by 100 pbs at the next two meetings, the MPC does not have to continue the cut cycle right away. The Council can wait for the strengthening of the conviction that inflationary pressure is permanently decreasing. We will remind you that the effects of the trade war will have to be imposed here, and here we see downward risks (in the short and medium term) and upward risks (in the long term).

Financial market update

Easter trading did not bring significant changes in the FX market, with the exception of USDPLN, but this is definitely due more to the weaker dollar than the strong zlot. Bond markets, on the other hand, have opened with gentle increases in yields after the holiday weekend. Why gentle? The only new signal is the sell-off in long-term U.S. Treasury securities, which suggests a rotation of assets toward other safe alternatives. The chances that spreads between U.S. and European paper will continue to widen in these circumstances are therefore high, and this should be good for Polish government bonds. Our focus in the coming days will be on the POLGB sale auction (on Thursday) and domestic macro data. The importance of the latter has increased and negative surprises should give wind to bets on lower NBP interest rates. The biggest question in monetary policy space right now pertains to the size of the May interest rate cut. The market is not fully on board with the NBP governor’s 50 bps preference and neither is the Council, judging from the few MPC member comments coming in recently. It is therefore likely that macro data will tip the scale and this week’s releases are very relevant.