Inflation in Poland to reach central bank target range in Q1 2026

Poland's central bank now projects inflation to sustainably return to its target range by Q1 2026, an earlier timeline than previously anticipated. The July forecasts indicate inflation reaching 3.5% in Q1 2026, the upper limit of the target, before further decelerating to 2.1% by Q4 2027, primarily driven by weakening wage growth exerting a delayed impact on prices. This revised outlook suggests a more optimistic disinflationary path, potentially influencing future monetary policy decisions and investor sentiment towards Polish assets.

Analysis

Poland's central bank has issued a revised and more optimistic inflation forecast, now projecting a sustainable return to its target range by the first quarter of 2026, sooner than previously anticipated. The projection details a non-linear path, with inflation expected to dip to 2.9% in Q3 2025 before temporarily rising to 3.6% in Q4 2025, and then settling at 3.5%—the upper limit of the target range—in Q1 2026. The bank attributes the longer-term disinflationary trend, which sees price growth slowing to 2.1% by Q4 2027, to the delayed impact of weakening wage growth on consumer prices. This updated guidance suggests an accelerated normalization of price pressures, which carries significant implications for the future trajectory of Poland's monetary policy.

Key Decisions for Investors

• Given the accelerated timeline for inflation returning to target, investors may consider Polish sovereign bonds attractive, as the forecast could bring forward expectations for monetary policy easing.
• The outlook is generally supportive for Polish equities, which could benefit from lower inflation and the prospect of reduced interest rates, but it may create potential headwinds for the Polish Zloty (PLN) if rate cut expectations build.
• It is critical to monitor incoming Polish wage growth data, as the central bank explicitly links the projected 2026-2027 disinflation to a delayed slowdown in wages, making this the key variable to watch for forecast validation.