Poland’s CPI growth picks up to 5.4% y/y, according to flash estimate

Poland’s CPI growth picks up to 5.4% y/y, according to flash estimate
By bne IntelliNews September 1, 2021

Polish CPI growth accelerated to 5.4% y/y in August, the expansion thus accelerating by 0.4pp versus the annual reading recorded the preceding month, statistical office GUS said on August 31. 

The flash reading puts Poland’s inflation at a 20-year high, adding ever more political heat to the debate about the state of the economy post-pandemic. However, a move to quash accelerating inflation from the National Bank of Poland (NBP) appears unlikely before it is clear how big the impact of the expected fourth wave of the COVID-19 (coronavirus) pandemic will be.

That said, the consensus is growing that the NBP could deliver a small hike in the rates even this year still.

“As uncertainty about the impact of the expected severity of the pandemic declines, there may be a majority in the Monetary Policy Council this year to tighten monetary conditions,” Bank Millennium said in a comment on GUS figures. 

“Postponing this decision into the future … will mean a rapid and significant increase in the cost of money in the coming years in order to keep the price dynamics in check and reduce the risk of winding up the price-wage spiral,” Bank Millennium also said. 

The flash reading is above the market consensus, which expected an expansion of 5.2% y/y. Inflation is set to remain elevated throughout 2021, most analysts say. 

“[We expect that] inflation will stay above 5% until the end of this year. The drop in inflation expected in the second quarter of 2022 will not be deep and throughout the next year, CPI inflation may exceed 3%,” Poland’s state-controlled bank PKO BP said in a comment. 

CPI inflation was boosted by all basic components in August, with core inflation rising to 3.9%-4% y/y from 3.7% y/y in July, analysts estimate.

Other than core inflation – which is price growth without food and energy – inflation in August surged on the back of fuel, its prices ballooning 28% y/y, easing only slightly after an expansion of 30% y/y the preceding month.

Food and non-alcoholic drinks prices also stepped up their annual growth rate, increasing 3.9% y/y in August after adding 3.1% y/y in July. Growth in energy prices picked up to 6.1% y/y in the eighth month after growing 5.3% y/y in July.

In monthly terms, the CPI increased 0.2% in August, slowing down from 0.4pp the preceding month, the flash estimate also showed. Prices of food and non-alcoholic drinks slid 0.3% m/m, while prices of energy expanded 0.8% on the month. Fuel prices grew 1.8% m/m.