Inflation getting ever closer to peak

Inflation well below expectations

In accordance with the GUS data, CPI inflation increased from 16.6% YoY in December 2022 to 17.2% YoY in January 2023, running below the market consensus (17.6%) and our forecast (17.8%). This means that inflation was running above the upper band for deviations from the NBP’s inflation target (3.5% YoY) for 21 months. Data on January inflation is incomplete yet, and it is only preliminary due to the annual revision of weights in the inflation basket. Thus, the possibility of drawing conclusions based on data is limited. Complete data on price growth in individual categories in January and February 2023 including the revised inflation index will be published in March.

Strong core inflation rise continues

In accordance with incomplete data published by the GUS, an accelerated growth in energy prices (34.0% YoY in January vs. 31.1% in December) was the main reason behind the inflation rise in January. Inflation was driven up by the combined effect of discontinuation of the Anti-Inflation Shield programme and the launching of new price-stabilising instruments. Just as we had expected, those factors turned out to be pro-inflationary, and the prices of energy went up by 10.4% MoM in January. However, the impact was markedly lower than we had expected, and this was the main reason why the January inflation figure was lower than we had estimated.

Comparing to December, inflation was also driven up by a stronger growth in the prices of fuels (18.7% vs. 13.5%), supported by last year’s low base effects connected with the Anti-Inflation Shield (see MACROpulse of 15/02/2022). Inflation was also driven up by higher core inflation which, in accordance with our estimates, rose to 11.9% YoY in January comparing to 11.4% in December. A further, strong core inflation rise reflects the inflation pressure, which continues to be seen across many sectors of the Polish economy.

However, a slower growth in the prices of food and non-alcoholic beverages (20.7% vs. 21.5%) was the factor that drove the inflation figure down. The slower growth referred to above is consistent with the drop in the prices of agricultural commodities seen in global markets over the last couple of months (see AGROmapa of 15/12/2022). Nonetheless, please note that we will most probably see a temporary acceleration of price growth in this category in February 2023, which will be connected with last year’s low base effects arising from a lower VAT for foods.

Inflation peak in February 2023 may be lower than we expected

Today’s data carries a downside risk for our forecast, in which inflation in Poland is to reach its local peak in February 2023 at approx. 18.8% YoY, and then to start falling gradually to 7.1% in December 2023 (see MACROmap of 30/01/2023). However, the revision of weights in the inflation basket referred to above carries an upside risk for the short-term inflation path. We maintain our monetary policy scenario, in which NBP interest rates will not change until the end of 2023 (see MACROpulse of 08/02/2023).

Today’s lower-than-expected data on inflation in January is slightly negative for the PLN and the yields on Polish bonds.