Polish core inflation accelerates to 4.5% y/y in October

Polish core inflation accelerates to 4.5% y/y in October
By Wojciech Kosc in Warsaw November 18, 2021

Poland’s core inflation, which measures price growth without food and energy, increased 0.3pp to 4.5% y/y in October, the National Bank of Poland (NBP) said on November 16.

Headline inflation in Poland has been elevated for months, with CPI growth coming in at 6.8% y/y in October versus 5.9% y/y in September, Poland’s statistical office GUS said earlier this week. Prices are currently expected to climb to at least 7% y/y by February, fuelled by rising prices of energy that underpin most other price categories, notably food. 

After months of assuring that hiking interest rates would come in November at the earliest – once and if Poland’s economic recovery after the COVID-19 (coronavirus) pandemic proves sustained – Poland’s Monetary Policy Council, the rate-setting body of the NBP, increased the basic rate from 0.1% to 1.25% in two hikes in October and November.

The outlook for core inflation is that it will remain elevated throughout 2022. 

“The contribution from demand-side pressures and wages should take the lead in holding core inflation at elevated levels. This reflects a very strong labour market and overall internal demand as well as the inflationary policy mix,” ING said in a comment.

The NBP expects headline CPI to reach 4.8-%-4.9% in 2021 versus the previous outlook of 3.8%-4.4% that was published in July. 

After that, the NBP predicts inflation at 5.1%-6.5% in 2022 (2.5%-4.1% in the previous outlook) and 2.7%–4.6% in 2023 (2.4%–4.3%).