Poland: Inflation is the lowest since March 2021

Energy prices had the strongest impact on reducing y/y inflation, PKO BP economists said in their Thursday commentary, referring to the Central Statistical Office data. Inflation is the lowest since March 2021, they added.

The Central Statistical Office (GUS) reported on Thursday in preliminary data that the prices of consumer goods and services in January 2024 increased by 3.9% year on year, and compared to the previous month, prices increased by 0.4%.

PKO BP analysts noted that CPI inflation “dropped significantly” in January, to 3.9%. y/y vs. 6.2 percent y/y in December. As they added, the scale of disinflation was stronger than most market forecasts and close to the bank’s expectations.

As the bank’s analysts emphasized, the data are preliminary; in mid-March, with the publication of inflation data in February, will be revised by applying an updated inflation basket based on last year’s structure of household expenditure.

“We estimate that the revision will reduce January inflation by 0.1 pp, so its impact will be significantly smaller than last year (…). Inflation is the lowest since March 2021,” they emphasized.

According to them, energy prices had the strongest impact on reducing y/y inflation; in January 2023, they increased by 12.6%. mdm, and in January 2024 by 0.4%. mdm, which produced a strong base effect.

“We estimate that (with the current basket) core inflation has decreased to 6.2%. y/y vs. 6.8 percent y/y in December. On a m/m basis (…) core prices increased by 0.4%, but the current momentum of core inflation has decreased again, although it is still significantly above the inflation target,” they said.

As they noted, food prices increased by 0.9% in January. mdm, weaker than in previous years. They added that the annual growth of food prices decreased to 4.9%. y/y and in the next two months this trend will continue.

As analysts noted, fuel prices contributed the least to January’s disinflation, although their decline was significant (2.3%). “Current data from stations indicate that it may be fully reversed in February, and this category may slightly increase inflation in February,” PKO BP analysts estimate.

Analysts pointed out that January brought a clear and stronger than expected decline in inflation, but ex post real interest rates became positive.

“It is also worth noting that such a deep drop in inflation in January shifts the starting point of the new inflation projection significantly downwards (from 5% to approximately 3.3%),” they said. In their opinion, the data indicate a further decline in core inflation. “According to the announcements, it is the price processes in this part of the basket that are to be most important for the Monetary Policy Council,” the analysts noted. In their opinion, the chances of a reduction in interest rates in March are not eliminated. (PAP)

author: Aneta Oksiuta

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