Fuel prices will not support a further decline in inflation 

According to preliminary data from the Central Statistical Office, inflation in October amounted to 6,5%. y/y, i.e. by as much as 1,7 pp. less than in September. On a monthly basis, prices increased by 0,2%. The current sharp decline in prices on an annual basis has two causes. The first is the so-called "base effect" resulting from the fact that a year ago in October we recorded the peak of inflation in 2022. It amounted to 17,9 percent then. and it was the second highest reading in the current growth cycle, a higher reading was recorded only in February this year. – 18,4 percent

The second element is the decline in gasoline and diesel prices, which we observed last month. In October, fuel prices dropped by 4,2%. m/m. This is a greater decline than in September, when prices at gas stations dropped by 3,1%. According to the Central Statistical Office, the cumulative decline in fuel prices in Poland in September and October amounted to 7,9%. This is a unique phenomenon on a global scale, because in other countries, in the current economic conditions, fuel became more expensive and was one of the main sources of inflation. In the USA, which is the largest producer oil in the world, gasoline prices at stations increased by 8,5% in September alone.

Fuel prices are an element that may seriously affect inflation in the coming months. Or at least to reduce the dynamics of its decline. At the end of October, we observed an increase in the retail price of 95 petrol to approximately PLN 6,50, and at the current price of crude oil this price may increase up to PLN 7 in the near future. If tensions in the Middle East continued to increase, which would result in an increase in oil prices above $100 per barrel, then the increase in fuel prices could stop a further decline in inflation in Poland in the coming months.

What decision will the MPC make?

The current inflation reading will have a major impact on the decision RPP on the level of interest rates. The next meeting is scheduled for next week (November 7-8). However, it seems that in the post-election reality the Council will not decide to cut rates again. At the same time, the market predicts that there will be one rate cut of 2024 basis points by January 25.

It is therefore not surprising that Polish investors are less and less afraid of inflation. According to the Puls Inwestora Indywidualny study eToro, 32 percent Polish investors are most concerned about the condition of the Polish economy in the next 3 months. The second greatest risk is the level of interest rates (15 percent of responses), and only the third is inflation, perceived as the greatest threat by 11 percent. investors.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.