PL: Inflation jumped in January

According to preliminary data, annual inflation in January reached 5.3%, significantly exceeding both the consensus forecast of 5% and our own expectation of 4.9%. On a monthly basis, prices increased by 1%, with prominent rises across all published categories. We anticipate that inflation will continue to rise in the coming months, peaking in the spring.

The flash release indicates robust monthly growth across all categories. Food prices increased by 1.6% month-over-month, resulting in an annual inflation rate of 5.5%. Energy prices surged by 13.2% year-over-year, with a monthly increase of 1.4%, primarily due to a higher distribution fee for gas. Fuel prices for personal transport rose by 1.8% compared to December, maintaining a similar price level to January 2024. Todays release marks the first significant upside surprise in inflation after several months of alignment with market expectations.

We believe that the National Bank of Poland will definitely consider today's data, potentially using it as a argument to delay the restart of monetary easing. Our forecasts suggest that inflation will experience a double peak in the first half of the year, with the first peak in March, at approximately 5.5%, and the second in June at a similar level. Following the dissipation of the base effect from last July's energy price hike, we expect inflation to fall below 5% and remain close to 4% until the end of the year.