A high-stakes electoral gamble over inflation by Poland’s central bank may be about to pay off, with preliminary September figures on Friday expected to show a large slowdown in consumer price rises, supporting the central bank’s contentious decision to aggressively cut rates earlier this month.
But all may not be as it seems. Political tensions are running high in Poland ahead of a close-knit national election on October 15, and opposition voices are adamant the data is being manipulated. They say Polish central bank president Adam Glapiński’s decision to cut rates by 0.75 percentage points was influenced by his political allegiance to the incumbent Law and Justice party (PiS) as it fights for reelection.
Glapiński, a former minister, said the National Bank of Poland pushed through the cuts on modeling that indicated inflation would finally fall below 10 percent in September, a level the bank previously stated needed to be broken for rate cuts to begin but which analysts dismissed as being entirely arbitrary.
One Warsaw-based analyst working for an international bank told POLITICO the sub 10 percent figure had nothing to do with any formal targets and was thus misleadingly being celebrated. “He is selling it with great success to the public and the media,” the analyst said, having been granted anonymity because of Glapiński’s habit of verbally attacking commentators. “Even we economists are saying this… it is a full propaganda project.”
The strategy does, however, seem to be working, said Adam Antoniak, a senior economist at ING Bank, which expects Polish inflation to plummet to 8.3 percent from 10.1in September, in part due to lower fuel costs, which are now at the center of the controversy.
Suspicions that prices were being manipulated arose after Polish retail fuel prices diverged significantly from other Eastern European countries, falling 7 percent in the first two weeks of September relative to rises of 1.8 percent and 1.4 percent in Hungary and Czech Republic respectively, according to a report by Goldman Sachs.
ING’s Antoniak agreed the drop in retail and wholesale prices was “quite surprising.”
“It doesn’t look like anything typical for this time of year,” he added. “It seems obvious that this is temporary — and that prices will return after elections.”
But that view doesn’t necessarily square with the data. According to Bloomberg prices, benchmark European fuel, known as Euro-bob, fell 8 per cent in the comparable period, implying Poland’s energy retail prices may simply be following a broader decline in wholesale prices. These historically reprice lower in September in Europe in line with a mandated switch from “summer” fuel grades to “winter” ones. Data from globaldieselprices.com corroborated that pump prices have either stayed flat or fallen in September across most of Western Europe.
The picture is muddied too by indications that conditions in Hungary and the Czech Republic could be driven by local idiosyncrasies. Hungary’s MOL refinery has been hit by Ukraine demanding higher fees in recent weeks for the Russian crude it transits across its territory, while the Czech Republic reintroduced diesel excise duties on August 1.
Polish government critics nonetheless have seized on the domestic decline to accuse energy conglomerate PKN Orlen, which is 49 percent owned by the Polish state and the dominant market player in the country, of manipulating prices for political purposes, and are now calling for a European Commission investigation.
The government’s outsized control over both the energy sector and the country’s rich material wealth makes it easy to “interfere in the market,” said Grzegorz Drozdz, an analyst at the investment firm Conotoxia Ltd. That means the low prices are akin to an unofficial “price freeze.”
But while Commission sources told POLITICO they were “constantly monitoring the situation in the EU fuel markets with a view to detecting potential infringements of the EU competition rules,” they did not confirm they viewed the Polish case as manipulation.
Hesitation to intervene could be down to how many European Union countries have benefited from energy-related subsidies this year to deal with the energy shocks caused by the invasion of Ukraine by Russia in 2022.
The mechanics of restricting government-owned enterprises from engaging in anti-competitive practices or market collusion are further complicated by the fact that such interventions are politically mandated by design.
“European government intervention in fuel markets through taxes and subsidies is the rule, not the exception,” said Craig Pirrong, an economist at the University of Houston and an international expert in commodity market manipulation. “By the logic of the critics of Polish fuel pricing, all are guilty of manipulation all the time.”
“Comparisons to wholesale prices and taking into account seasonal factors are more informative,” he added.
PKN Orlen itself has rubbished the claims of manipulation arguing its price improvements can be explained by efficiencies drawn from its recent acquisition of domestic rivals Lotos, PGNiG and Energa.
“Thanks to the integration of supply, trading and purchasing we are able to effectively meet all the needs of the entire PKN Orlen group,” the company’s Director of Communications, Adam Kasprzyk, said in a video posted on X, formerly Twitter, this week. “With the exception of unexpected interruptions or shocks, which the group has no control over, there is no risk of fuel shortages or imminent higher prices.”
In the same video, Kasprzyk appealed to Polish citizens not to resort to panic buying on the assumption that low prices may be temporary.
Whatever the reality, the success of Glapiński’s political gambit may well be short-lived anyway, with professional forecasters recently raising their expectations for Polish inflation in 2025 to 4.3 percent from 4 percent. But that doesn’t mean the central bank will stop cutting rates.
“It’s part of a broader picture in which the central bank and the government are trying to convince the public that inflation is no longer a problem,” said Antoniak.
