Inflation in Poland to increase soon

Today, we zoom in on development in Poland. Firstly, the central bank kept the policy rate unchanged and presented the new inflation and growth forecast. While inflation risks are projected to escalate in the following year, the growth forecast has been revised to a marginally more pessimistic outlook. At the same time, we published Special Report Energy prices to propel inflation upward where we discuss the anticipated peak of inflation and the rate at which it will normalize. The most significant driver of this inflationary surge will be the partial deregulation of household energy prices, commencing in July. On top of that, the PPI suggests a continued slowdown in inflation, while the trends in nominal wages and grain futures indicate an opposing momentum. To better estimate energy impact on inflation, we construct a synthetic price index to estimate the relative undervaluation of household energy tariffs. Energy prices are expected to contribute 1.3 percentage points to our baseline, with a potential surge to 2.2pp in the adverse scenario. By the years end, we project inflation to hover around 4.6%, with a potential uptick in Q1 2025 to approximately 5.1%.