Polish CPI inflation picked up 1.5pp to 13.9% y/y in May, the statistical office GUS said in a flash estimate on May 31.

The reading is in line with consensus but remains indicative of the growing inflationary pressure in the wake of the war in Ukraine, analysts say. That will only affirm expectations of further monetary tightening by the National Bank of Poland (NBP) in June and beyond.

As the war’s impact on crops is only becoming visible now, more price growth is looming. That will come together with even more expensive energy in the wake of Poland – and most of the EU – deciding to end dependence on Russian oil and gas.

At the same time, a tight labour market in Poland is expected to give ever stronger momentum to wage demands to compensate for inflation. 

“The wage-inflation spiral is accelerating, which will significantly hinder efforts to contain inflation, even with an expected strong slowdown in economic activity in the second half of the year,” Bank Millennium noted in a comment on the GUS estimate.

The increase in the inflation rate came on the back of growth in all major components, the breakdown of the data showed.  

Food prices grew 13.5% y/y, a slight pick up against a gain of 12.7% y/y in April.

Elsewhere, energy prices went up 31.4% y/y in May after growing 27.3% y/y the preceding month. Fuel prices increased 35.4% y/y in the fifth month, compared to a gain of 27.8% y/y in April.

Core inflation picked up to around 8.3% y/y in May from 7.7% y/y in April, analysts estimate.

The NBP’s hiking its reference interest rate next week is virtually certain. That will be the ninth successive increase in as many months. The market consensus is for a 75bp push that will land the interest rate at 6%. It was 0.1% only in October. 

The target rate level is seen at 6.5%-7%.

In monthly terms, the CPI increased 1.7% in May, easing 0.3pp versus the preceding month. 

Prices of food and non-alcoholic drinks grew 1.3% m/m while prices of energy expanded 3.4% on the month. Fuel prices added 5% m/m.