Polish CPI grew 16.6% y/y in December, well below the consensus, a flash estimate from Poland’s statistical office GUS showed on January 5 (chart).

The reading eased 0.9pp compared to November, the second consecutive y/y slowdown y/y of the index. The CPI also came in at 0.7pp below the consensus line. Analysts say that for inflation to be reined in, it will be crucial to stop the spillover of high energy costs to other goods and prevent inflation from solidifying through price adjustment such as that of wages. 

“Inflation data for November and December indicate that the war-induced shock in energy prices is slowly fading. It also seems that the pressure to increase food prices is not intensifying,” Bank Millennium said in a comment on GUS figures. 

Price growth is expected to renew in early 2023 on the back of the return of standard VAT rates for electricity, heat, fuels, and natural gas, which were lowered in line with the government’s anti-inflation measures. 

That said, beginning in March, the CPI is expected to embark on a steadier – even if still incremental – downward path due to a high reference base and further attenuation of the energy commodity price shock.

The December inflation reading only affirmed the National Bank of Poland (NBP) in its wait-and-see approach to monetary policy. The NBP kept its reference interest rate on hold at 6.75% for a fourth consecutive time on January 4.

The easing of inflation in December came on the back of slower growth rates across all major price components, GUS showed in the breakdown of the data.  Food prices grew 21.5% y/y in December, the flash estimate said, slowing down against a gain of 22.3% y/y in November.

Energy prices eased growth to 31.2% y/y in December after growing 36.8% y/y the preceding month. Growth in fuel prices also faltered to 13.5% y/y in December, compared to a gain of 15.5% y/y in November. 

In monthly terms, the CPI increased 0.2% in December, slowing down by 0.5pp versus November.

Prices of food eased growth to 1.4% in December from 1.6% m/m in November. In the energy segment, prices deepened their fall to 3.3% m/m from a decrease of 0.1% m/m the preceding month. 

Only in fuel segments did prices pick up expansion in the twelfth month, growing 1.6% m/m (+1.2% m/m in November).