Consumer inflation (according to preliminary estimate) in May was in line with expectations (4.8% YoY), reaching the highest level in approx. 10 years, while the May reading is probably the peak this year. Economists expect that the elevated level of inflation will remain for longer and may exceed 4% throughout 2021, and next year also remain outside the upper limit of the acceptable deviation from the central bank’s target – 3.5% y / y.
As reported by the Central Statistical Office (GUS), consumer inflation – according to preliminary data – amounted to 4.8% y / y in May 2021. Compared to the previous month, the prices of consumer goods and services increased by 0.3% in May. The prices of food and non-alcoholic beverages increased by 1.7% y / y, energy carriers – by 4.4% y / y, fuels for private means of transport increased by 33% y / y. In monthly terms, the prices of food and non-alcoholic beverages increased by 0.6% MoM, energy carriers rose by 0.3% MoM, while fuel for private means of transport decreased by 0.9% MoM.
The largest contributions to the CPI were core inflation, fuels as well as food and energy. Economists estimate that core inflation in May was in the range of 3.8-4.4% y / y. According to analysts, the effect of a very low base for fuels will start to fade from June, which will also lead to a gradual decline in the CPI in the following months of the year, but probably – in their opinion – will remain above 4% until the end of the year.
Analysts point to the low labor supply in Poland, which, with the economic recovery, may generate wage pressure and perpetuate higher inflation.
Some analysts forecast that in the conditions of signals from a shallower decline in GDP and better investment activity recorded in 2018 Q1, which gives a signal for a faster consolidation of the economic recovery, the Monetary Policy Council (MPC) will decide on the first interest rate hike in 2021 year.
Some economists see a threat to the increase scenario, resulting from the continued uncertainty about the course of vaccinations and the possibility of a return to pandemic restrictions in the fall, which – in their opinion – will prevent the Council from hike this year. Analysts indicate that at the beginning there will be a change in the communication of the MPC with the market and, in line with the announcements of the Council, restrictions on asset purchases.
Below are the most interesting comments from analysts:
“Today’s reading is probably the local peak in inflation, but in the coming months it will remain at a high level. Throughout the year, consumer price growth may exceed 4%, and in 2022 it will probably also remain above the upper limit for deviations from the NBP target. the NBP projection will bring a clear upward revision of the path of inflation and GDP forecasts “- senior economist at Bank Pekao Adam Antoniak.
“As the Polish economy is to grow at a pace of around 5% this and next year, and inflation will remain high in this period, we believe that the NBP will not be able to maintain a loose monetary policy any longer” – Erste Group Research analyst Małgorzata Krzywicka
“Thus, CPI inflation will remain at the level of not only 4+, but possibly even 4.5+ until the end of the year, which will put pressure on the MPC with high core inflation. This will, however, in our opinion, remain adamant” – analysts at PKO Bank Polski.
Source: ISBnews
