Polish CPI expanded 2.9% y/y in August, maintaining the annual growth rate recorded the preceding month, the statistical office GUS said on September 13. The reading is 0.1pp above GUS' flash estimate, published late last month.
The reading is not a surprise, as headline inflation is under pressure from elevated core inflation, which came in at an estimated 2.2% y/y in August. Analysts’ earlier forecasts of CPI growth moderating in late 2019 have now been adjusted. Inflation is now expected to hover at around 3% y/y until the end of the year before peaking at 3.7%-3.8% y/y in the first quarter of 2020.
Despite price growth predicted to reach the upper levels of deviation from inflation target – set at 2.5% – the Polish Monetary Policy Council (MPC) will likely remain dovish.
“The MPC is mentally ready for a temporary rise in inflation … and at the same time its analytical framework precludes forecasting sustained inflation growth,” mBank said in a comment on the GUS release. In effect, the base scenario of the MPC keeping rates unchanged at their current record low of 1.5% for the foreseeable future remains in place.
Broken down by key segments, the annual CPI growth in August was driven by rising prices of the most-weighted segment of food and non-alcoholic drinks, where price growth accelerated to 7.2% y/y, compared to an already strong reading of 6.8% y/y in July.
Prices in the housing and hotels and restaurants segments also drove up the headline figure, increasing 1.9% y/y and 4.7% y/y, respectively. That compares to housing prices expanding 2% y/y in July while growing 4.4% y/y in hotels and restaurants.
Prices in recreation in culture also contributed to inflation, growing 2.8% y/y, compared to 3% y/y in July. Prices in health care grew 3.6% y/y versus 3.7% y/y the preceding month.
In monthly terms, CPI did not change in the eighth month after an expansion of 0.3% m/m in July.