Polish CPI grew 5% y/y in July, the annual growth rate picking up 0.6pp versus the annual reading from the preceding month,  statistical office GUS said on August 13.

The 10-year high reading confirms the flash estimate, which GUS published earlier this month. 

The reading is more food for thought for the National Bank of Poland (NBP), which has long said it might only tighten the currently super-loose monetary policy once it is clear that the economic recovery has solidified. 

That appears to be the case, as GDP jumped to an all-time high of 10.7% y/y in the second quarter, GUS said on the same day. But a move to quash accelerating inflation from the NBP is, however, unlikely before it is clear how big the impact of the expected fourth wave of the COVID-19 (coronavirus) pandemic will be.

High inflation is also a political problem for the government, facing an intensified criticism from the opposition, which says the price growth is impoverishing Poles.

The elevated CPI is not going away, either, ING says.“We maintain our view that the upward pressure on CPI in Poland should persist in the coming months. PPI inflation is still accelerating, which points to rising costs for companies. Given a strong rebound in demand, it should be easier now for companies to pass these costs onto consumers,” ING wrote in a comment on GUS' figures.

“The output gap in Poland is closing and should soon signal that the economy is overheating, supported by the Polish Deal, which is aimed at further boosting consumption. The growth of food prices is also accelerating,” ING also said.

All the main CPI aggregates contributed to the faster price growth. The price of fuel increased by 30% y/y in July, the breakdown of the data showed. Transport prices – of which fuels are a part – grew 18.5% y/y, adding 2pp versus June.

Food prices increased 3.1% y/y in the seventh month, compared to growth of 2% y/y in June. Energy prices added 6.2% y/y in July versus 5.9% y/y the preceding month.

“We estimate core inflation was 3.6% y/y, compared to 3.5% y/y in Jun,” ING said.

Overall, goods prices went up 4.6% y/y in the seventh month after growing 3.8% y/y in June. Services price growth was 6.2% y/y versus 6.1% y/y in June.

In monthly terms, CPI expanded 0.4% in July, with the growth rate picking up versus an expansion of just 0.1% m/m in June.