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Core inflation in July 2020

Date: 17-08-2020

NBP data: In July 2020, inflation net of food and energy prices amounted to 4.3%. In the period under analysis, the Consumer Price Index (CPI) stood at 3.0% (y/y).

On 17 August 2020, Narodowy Bank Polski published data on core inflation indices in July 2020. In year-on-year terms, inflation:

  • net of administered (state-controlled) prices, amounted to 2.1%, compared to 2.3% a month earlier;
  • net of the most volatile prices, amounted to 3.4%, compared to 3.5% a month earlier;
  • net of food and energy prices, amounted to 4.3%, compared to 4.1% a month earlier;
  • the so-called 15% trimmed mean, excluding the impact of 15% of the price basket characterised by the lowest and highest growth rates, amounted to 3.3%, compared to 3.5% a month earlier.

In July 2020, the CPI inflation decreased to 3.0% y/y (by 0.3 percentage points from June 2020). The decrease in the CPI was mainly driven by a weaker food price growth (by 1.8 percentage points and standing at 3.9% y/y), mainly as a result of a decline in the prices of unprocessed food. The growth in the prices of services also slightly declined (by 0.1 percentage point, to 7.3% y/y), mainly on the back of lower prices of package tourism services. On the other hand, the growth of non-food prices picked up (including excise goods; by 0.3 percentage points, to 1.7% y/y), primarily due to weaker seasonal declines in the prices of apparel and footwear (a base effect), as well as higher prices of goods related to recreation and arts. The growth in energy prices went up (by 0.8 percentage points to -3.0% y/y), mainly as a result of a rise in fuel prices coupled with a simultaneous decline in the prices of natural gas tariffs as new, lower tariffs on natural gas had been accepted by the Energy Regulatory Office.

Narodowy Bank Polski computes the four core inflation indices on a monthly basis to highlight the nature of inflation developments in Poland. The CPI shows average price movements across the whole broad basket of consumer goods. When calculating core inflation indices, price changes in various segments of the basket are analysed. This helps to better identify the sources of inflation and forecast future trends more accurately. This also helps to find to what degree inflation is permanent and to what extent it is determined, e.g., by price changes of a short duration triggered by unpredictable factors.

The core inflation measure most frequently used by analysts in inflation targeting is inflation net of food and energy prices. It captures trends in the prices of those goods and services which are fairly responsive to the central bank’s monetary policy. On the other hand, energy prices (including fuel prices) are not set domestically but determined in the global markets, sometimes as a result of speculation. Food prices are largely dependent on, among other things, the weather and conditions prevailing in the domestic and global agricultural market.

See also: Core inflation data »

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