Inflation in Poland rose to 4.2% in July, up from 2.6% in June, marking the highest level this year under the new government that took office in December, following on from the partial unfreezing of energy prices at the beginning of the month.

This also marked the first time in six months that inflation exceeded the central bank's target of 2.5% (+/- one percentage point).

However, the figure was slightly below analysts' expectations, which ranged between 4.4% and 4.6%.

On a monthly basis, prices increased by 1.4% in July, the highest rate since January 2023 and up from 0.1% in June, according to new data from state agency, Statistics Poland (GUS).

July’s inflation was largely fuelled by energy prices, which increased by 10% compared to the previous year and by 11.8% from the previous month. 

In contrast, food prices were up 3.2% year-on-year but declined by 0.5% from the previous month. 

Whilst prices for fuels used in private transport rose by 1.1% year-on-year and remained unchanged month-on-month.

“The bulk of the change in inflation is energy, but the scale of secondary effects in the following months is unknown,” according to economists from mBank. They also noted that increases in water and sewage prices, among other factors, contributed to inflation, although precise figures on these changes are not yet available.

The economists also estimate that annual core inflation, which excludes volatile energy and food prices, has ceased to decline and accelerated from 3.6% in June to a range of 3.7% to 3.8% in July.

At the beginning of July, Poland's government partially lifted the freeze on energy prices for households, ending a measure introduced in 2023 by the previous Law and Justice (PiS) government in response to the energy and inflation crisis triggered by Russia's war in Ukraine.

Furthermore, forecasts suggest that inflation in Poland will continue to rise in the coming months.

The projection released in July by the National Bank of Poland (NBP) estimates that inflation will reach approximately 5% by the end of the year and is expected to rise above 6% in the early months of 2025. 

However, it is anticipated to slow down to around 4-4.5% in the latter half of next year.

The central bank projects that inflation will return to its target range of 1.5% to 3.5% by early 2026.