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The Inflation Rate in Poland is Still Rising

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Poland Inflation

Poland Inflation

From 17.2% YoY in September to 17.9% YoY in October, consumer inflation increased. Prices rose at the quickest rate in monthly terms since April. Price rise is becoming more evenly distributed. The majority of MPC members want the tightening cycle to finish, but we think the Council will raise rates by 25 basis points in November.

The CPI inflation rate increased from 17.2% YoY in September to 17.9% YoY in October, according to StatOffice’s flash estimate. The CPI increased at a rate that was roughly in line with market expectations and within our projection (18.1% YoY). As anticipated, gasoline prices rose in October (4.1% MoM).Energy prices also increased in tandem with this (2.0% MoM). According to market assessments, the peak in coal prices has likely passed.

The cost of food is also still rising at the same time. Food and non-alcoholic beverage costs have increased by as much as 2.7% since September, and this category’s price growth has now reached close to 22% on an annual basis. Following prior rises in energy and transportation expenses, price increases are still having an impact on the broader economy. According to our calculations, core inflation, which excludes the cost of food and energy, increased to about 11.1–11.2% YoY in October from 10.7% YoY in September.

The CPI increased by 1.8% on a monthly basis, the highest level since April of this year, indicating solid momentum. The prediction of an inflation peak in the summer has not only not come true, but it is also getting harder to support the theory of an inflation plateau. The pinnacle of local inflation is still to come. The inflation rate will be more than 20% year over year in February of the following year, and it won’t fall below 10% until the fourth quarter.

The risks are still skewed to the upside, and the inflation forecast remains quite uncertain. If the government chooses to stop the 23% to 5% VAT decrease on energy after the end of 2022, inflation might increase by an additional 0.5 percentage points starting in January 2023.Although the struggle against inflation is not yet ended, those who favour ending the cycle of interest rate increases seem to be in control of the MPC. The structure of the most recent NBP macroeconomic prediction will have a significant impact on the interest rate decision for November.

This should show a higher CPI path than the prediction made in July as well as continued inflation over the NBP’s objective. As a result, we anticipate the Council raising interest rates by 25 bps the following week (our base case), while there is also a good chance that rates will stay the same.

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