The main aim of the article is to analyse the key determinants of inflation in Poland in the period of 1997 - 2009. The paper uses a research method developed based on the literature on monetary policy and international finance, as well as on econometric methods (Vector Error Correction Model - VECM). Inflation is commonly regarded as one of the most important problems of an economy, particularly in transition countries. Therefore, fight against inflation and striving to maintain a stable price level is the main objective of the monetary authorities in these countries. In order to conduct effective monetary policy, central banks must possess information concerning the current economic situation in the country and the fundamental relationships between the main economic variables. According to the findings of the analysis concerning inflation in Poland, the most important inflation factors in the period 1997 - 2009 were demand factors, especially government spending as well as cost factors, especially growth of wages. Furthermore, it was found that changes in inertial factor and import prices best explain the variability of inflation in Poland in the period 1997 - 2009.