Polish CPI grew 2.5% year on year in May (chart), below the consensus line of 2.8% y/y and 0.1pp above the final April reading, according to a flash estimate from Poland’s statistical office GUS, released on May 29.
Analysts expect the CPI to keep climbing due to the end of anti-inflation regulations from the pandemic era, especially the phasing out of the zero VAT rate on foods in May and the planned doing away with the electricity price cap, from July.
But the pace of the expansion now appears likely to turn out slower than expected.
“A major source of uncertainty is the economy's reaction to the upcoming unfreezing of energy prices. However, data published in recent months consistently reduces … the potential range of inflation growth at the turn of 2024 and 2025,” PKO BP said.
The flash reading also points to core inflation – price growth without food and energy – easing to around 3.8% y/y in May from 4.1% y/y in April, analysts say.
Both headline and core inflation provide grounds for the National Bank of Poland (NBP) to at least consider lowering its reference interest rate from the current 5.75% later this year.
“There is room for cautious and slow reductions but in the statements [of policymakers] we see that for now there is a lack of will to do so,” PKO BP said.
Prices of food and non-alcoholic drinks grew 1.6% y/y in May, easing versus a gain of 1.9% y/y in April, the breakdown of the data showed.
Energy prices fell 1.8% y/y in the fifth month, the decline rate easing 0.5pp versus April. Fuel prices added 3.6% y/y in May, compared to -1.2% y/y the preceding month, GUS data also showed.
In month-on-month terms, the CPI added 0.1% in May, according to the flash estimate. Prices of food grew 0.3% m/m. In the energy segment, prices slid 0.2% m/m while falling 0.3% y/y in the fuel segment.
