Economic comment

NBP governor Adam Glapiński was even more explicit than in December, presenting argumentation against any monetary policy easing at his January’s conference. He said that government’s decisions regarding the energy price freeze have completely changed inflation outlook. As a result, current NBP forecasts show inflation bouncing up again in 4Q25 and ending this year at almost the current level. He said that the entire macroeconomic picture has changed and any interest rate cut would extend further inflation’s return to the target, therefore a discussion on rate cuts has to be delayed “for some time” (...) We stick to our view that the moment of first rate cut may be July 2025.

In the final reading for December, GUS showed CPI inflation at 4.7% y/y and 0.0% m/m. This is lower than its flash estimate of 4.8% y/y and 0.2% m/m, which itself was a downside surprise at the time of its release. No inflation rise vs. November was due to unusually low food price growth and core CPI behaviour in December – apparently, it dropped to 3.9-4.0% y/y from 4.3%. In our view, the core inflation decline was to some extent linked to December special offers – price cuts that may be reversed in the following months. Goods price inflation increased in December from 3.8% y/y to 4.0% y/y, while services price inflation eased from 7.2% y/y to 6.6% y/y. The CPI data provide a dovish argument for the MPC, although we are not sure that they will persuade the NBP Governor to soften his tone at his Friday's press conference.

In November, retail sales increased by 3.1% y/y in real terms, above 1.3% y/y recorded in October. The result significantly exceeded both our forecast of 0.5% y/y and market expectations (0.8% y/y). This is the second consecutive positive surprise. We consider it as proof that the underlying trend of domestic consumption remains robust, and it provides support for our claims presented in our last MACROscope that the poor consumption results in 3Q24 were only a temporary deviation from its growth trend, not a structural change. The December GUS economic survey did not show any radical changes in sentiment and does not change our view on the generally positive economic outlook for Poland. In November, the purchase prices of agricultural products increased by 1.7% m/m and it was the fourth consecutive month of growth.