Polish CPI growth came in at 13% y/y in May (chart), slightly below the consensus line and 1.7pp below the April reading, a flash estimate from Poland’s statistical office GUS showed on May 31.

Price growth is now at its lowest since May 2022 and heading toward single-digit levels by the end of the year, analysts say. 

“The decline in the annual inflation rate is undoubtedly aided by the high base effect from the previous year. However, in May, the intensity of inflationary processes weakened noticeably,” Bank Millennium said in a comment, pointing to the m/m inflation rate, which stood flat in May, the lowest reading since February 2022.

The dynamics of core inflation growth – which is inflation without food and energy – also appeared to have weakened in May, offering hope that it will “contribute to stabilising inflationary pressures,” Bank Millennium also said.

The May inflation reading will further strengthen the National Bank of Poland (NBP) in not rushing any monetary easing.  

The NBP kept its reference interest rate on hold at 6.75% for an eighth consecutive time in May and is expected to keep it unchanged throughout 2023.

Food prices grew 18.9% y/y in May, easing from April’s expansion of 24% y/y, a breakdown of the data showed. Energy prices expanded 20.4% y/y, compared to a gain of 26% y/y the preceding month. 

Fuel prices fell 9.5% y/y in May – after inching up 0.2% y/y in April – the continued effect of a very high reference base from last year’s wartime price shock. 

Prices of food grew 2.3% m/m in the third month. In the energy segment, prices declined 0.6% m/m while in the fuel segment prices dropped 1.8% y/y.

The outlook for the CPI remains largely unchanged. Price growth is expected to keep easing throughout 2023.

“We expect further declines in inflation in the coming months. There is a growing chance that the CPI will fall to a single-digit level by the end of the year, although in our opinion, it will still be close to 10%,” Santander Bank Polska said.