Polish CPI growth stabilises at 15.5% y/y in July but peak still ahead, analysts say

Polish CPI growth stabilises at 15.5% y/y in July but peak still ahead, analysts say
By Wojciech Kosc in Warsaw August 1, 2022

Polish CPI inflation stayed at 15.5% y/y in July, the first time since February when the annual reading did not accelerate, the statistical office GUS said in a flash estimate on July 29 (chart).

The reading is in line with consensus and could be a signal that inflation tide is finally easing in Poland, as consumer demand is weakening after a 10-month streak of interest rate hikes by the National Bank of Poland (NBP). The easing of oil price growth also helped, analysts point out.

“Inflation remains very high, although the July reading, as well as commodity prices on international markets, point to an ever closer peak, which will be slightly higher than the July figure,” Bank Millennium said in a note.

It is too early, however, to say with certainty that Poland’s inflation problems are over, Bank Millennium added.

A number of caveats still apply, including uncertainty as to the prices of energy and heating fuels – gas in particular – ahead of the cold season. A global economic slowdown could offset that to an extent via possible easing of fuel prices.

The NBP will certainly take note of the flash CPI reading and could end the long tightening cycle with one more hike of 50bp in September, analysts say. That would take the reference interest rate to 7%.

NBP Governor Adam Glapinski was recently caught on camera, responding to a question from a woman who happened to meet him in Sopot, a holiday resort on the Polish seaside.

“We currently have the highest interest rates and the highest inflation,” holiday-mode Glapinski told the woman in unusual circumstances for making a statement on monetary policy.

“If there is going to be one more [rate increase] it’ll only be of 0.25 [of a percentage point],” Glapinski added. 

The increase in the inflation rate came on the back of growth in all major components, GUS showed in the breakdown of the data. 

Food prices grew 15.3% y/y in July, the flash estimate said – a pick up against a gain of 14.2% y/y in June.

Elsewhere, energy prices went up 36.6% y/y in July after growing 35.1% y/y the preceding month. Fuel prices eased growth to 36.8% y/y in the seventh month after an increase of 46.7% y/y in June.

Core inflation remained at around 9.1%-9.2% y/y in July, analysts estimate.

In monthly terms, the CPI increased 0.4% in July, the expansion easing 1.1pp versus the preceding month.

Prices of food and non-alcoholic drinks eased growth by 0.1pp to 0.6% m/m in July, while in the energy segment, growth eased 1.7pp to 1.3% m/m. Fuel prices decreased 2.6% m/m in July after shooting up 9.4% m/m the preceding month.