Polish CPI grew 9.2% y/y in January, the annual growth rate picking up 0.6pp compared to December, statistical office GUS said on February 14. Inflation remains at its most elevated level since late 2000.

The price growth rate eased 0.2pp in what analysts say is the effect of the government’s so-called “anti-inflation shield”, a temporary reduction of excise tax on fuels.

The effect of the shield will only be temporary, lowering the near-term inflation peak to single-digit values but not addressing the underlying causes of price growth.

“These measures do not eliminate the sources of inflation but reduce its social cost … Given that the tax cut is a fiscal stimulus, it will contribute to raising the inflation path in the medium term,” Bank Millennium said in a comment on GUS release.

Surging consumer prices have pushed the National Bank of Poland (NBP) to raise interest rates five times in as many months since October from 0.1% to 2.75%.

At least one more increase is virtually certain in the first half of the year and is likely coming as soon as in March. Analysts pencil in a hike of 50bp to raise the reference interest rate to 3.25%.

The most-weighted category of food and non-alcoholic drinks drove CPI’s growth in January, the breakdown of the data shows. Food prices increased 9.4% y/y in January, compared to a growth of 8.6% y/y in December.

Housing costs added 12% y/y in January versus 11.2% y/y the preceding month.

The price of fuel grew 23.8% y/y in January, easing 9.1pp versus December, contributing to the easing of the headline figure’s expansion rate.

Transport prices – of which fuels are a part – grew 17.5% y/y overall, slowing down 5.2pp compared to the preceding month.

In monthly terms, CPI expanded 1.9% in January, the growth rate picking up 1pp versus December, GUS also said. That was the fastest m/m growth since 2000.

“January print likely marked a local maximum and in coming months inflation should ease on the back of introduced tax cuts under the anti-inflation shield. In February, headline CPI will likely drop to 6.0-6.5% y/y as further tax cuts will come into play: lowering of VAT on food, fuels, electricity and heating,” Erste noted.

“Assuming that introduced tax changes will remain in place until the end of July 2022, inflation is expected to jump again in August and double-digit price dynamics cannot be ruled out. Nevertheless, it seems highly likely that the government will prolong the tax changes into 2H22 or will be reversing them gradually,” Erste also said.