“It is not enough for the MPC to lower interest rates in September.” Comment after the publication of CPI inflation for July

The July decrease in inflation within the limits of permissible deviations from the inflation target is not enough for the MPC to reduce interest rates in September – wrote PKO BP economists in the commentary on GUS data. In their opinion, the reduction will take place in November.

On Thursday, the Central Statistical Office published a preliminary respect for inflation in July. According to him, the prices of consumer goods and services in July 2025 increased by 3.1 percent. In an annual basis, and compared to the previous month increased by 0.3 percent.

“Prices of food and non -alcoholic drinks in July increased by 4.9 percent y/y, maintaining the dynamics of June. In a monthly basis, prices in this category decreased by 0.6 % m/m, slightly less than the seasonal pattern, but close to our expectations. In the following months, the increase in food prices should brake, although dynamics will remain above 3.5 percent Inflationary, and in the horizon of our forecast will be increased, “wrote the economists of the PKO BP bank in a commentary to GUS data.

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They added that in July the prices of energy carriers increased by 2.4 percent. on an annual basis and by 1.1 percent month to month. They stated that this growth was lower than they expected and that a clear slowdown in price increase in this category was the merit of expiring the effect of the base associated with partial frostbite of carriers in July 2024.

“In July, gas tariffs were also released. Dynamics was conquered by the return of the power fee and frostbite system heat prices, the translation of which was burdened with high uncertainty. The whole category had the greatest impact on the July in July inflation,” wrote PKO BP economists.

They indicated that in turn fuel prices in July fell by 6.8 percent. in an annual basis and increased by 3.5 percent month to month. They admitted that “this is another month with a surprise on the side of this component.” They added that market quotations “indicated a increase in prices in this category around 2 % m/m”.

“We estimate that base inflation could be shaped around 3.3 percent y/y, which would mean a slight decline compared to June (3.4 percent y/y). Its medium -term impetus remains in check. We expect that by the end of the year basic inflation can still record small declines, but will stay above 3 % y/r.” – we read in the commentary of PKO BP.

In their opinion, from the MPP's point of view, the inflation, initiated in July, is important in July to the permissible range of deviations from the inflation target. This goal is 2.5 percent. +/- 1 point percent

“(…) In our opinion, it will still be too little to convince the advice to reduce at the next meeting in September. Our script assumes a reduction only in Novemberwhen another inflation and GDP projection proves the key argument and the budget details at 2026 will be known, “wrote PKO BP.

ms/ malk/