Still a plateau? MPC arguments continue to weaken

POLAND - In Brief 31 Mar 2025 by Jan Hagemejer

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Today’s flash release of inflation for March 2025 by Statistics Poland shows the same 4.9% year-on-year (y/y) for the third consecutive month. Our estimate of the core inflation in March stands at 3.5% y/y (net of food, energy and fuel prices). As far as the components of inflation are concerned, food and energy prices grew faster than the headline, but the fuels for private cars had a negative contribution to the headline inflation (due to both PLN appreciation and a drop in oil prices y/y).  Table 1 Inflation and nominal wage growth indices Source: Statistics Poland, own seasonal adjustment, core for March 2025 estimated based on available preliminary data. Although inflation on Graph 1 (left panel) may appear to show a plateau in annual inflation rates, the monthly data, again for a consecutive month, suggests a slightly lower average monthly inflation in 2025Q1 than in 2024Q4, particularly for core inflation. This can be observed on the right panel of Graph 1. This is not yet reflected in the annual data and may be temporary, but similar tendencies seem to be present in the nominal wage data. However, in conjunction with the February data on economic activity, so far, we cannot expect demand to be as strong as the MPC suggested in its March release. Moreover, given that in the second of 2024 inflation accelerated, statistical effects will drive the headline CPI measures down further (if the current monthly tendencies continue) in the corresponding period of 2025. What can we expect from the MPC during their April meeting? Since we suspect that MPCs are actively looking for reasons not to cut the interest rates, we can suggest the likely candidates this month: the e...