May's headline inflation in Poland, contrary to expectations, showed a slight decrease, yet this does not indicate a halt in the inflationary trend. The Monetary Policy Council (MPC) is expected to maintain a restrictive stance due to anticipated inflationary pressures, with monetary easing unlikely to commence before mid-2025. The Consumer Price Index (CPI) inflation escalated to 2.5% year-on-year in May, influenced by various sectoral price changes. Notably, food and non-alcoholic beverage prices experienced a marginal increase, while fuel and energy prices saw reductions.
Fuel prices, having declined in previous months, recorded an annual increase in May for the first time since March 2023. This shift contributed significantly to the year-on-year inflation rate. The impact of weather conditions on food prices was notable, with an earlier start to the growing season tempering the expected rise due to VAT adjustments. Core inflation also showed signs of moderation, estimated at around 3.8-3.9% year-on-year in May, with a month-on-month growth deceleration.
Despite the temporary relief, inflation is projected to ascend in the forthcoming quarters, potentially reaching around 5% year-on-year by the end of 2024. Regulatory changes and adjustments in energy prices are anticipated to further fuel inflationary pressures. The MPC is thus expected to keep interest rates steady throughout 2024, with any potential rate reductions not envisaged until at least mid-2025.
Source: think.ing.com