Poland: Fuel-driven inflation rise contained – ING

ING’s Adam Antoniak explains that Poland’s July CPI rose mainly due to higher fuel prices after VAT normalization, removal of the fuel cap and increased Oil costs following the US–Iran MoU collapse. Other price pressures remain subdued, with broad-based food disinflation and competitive retail chains. Core inflation edged slightly higher but shows no broad-based upward trend, keeping headline CPI within the central bank target.

Fuel shock but core pressures muted

"The final reading of July CPI inflation confirmed that consumer price growth accelerated to 3.0% YoY from 2.5% YoY in June. However, the increase was driven almost entirely by a renewed surge in fuel prices following the restoration of the standard 23% VAT rate from the temporarily reduced 8% rate and the removal of the fuel price cap at the beginning of July."

"Combined with higher oil prices after the collapse of the Memorandum of Understanding (MoU) between the US and Iran, this pushed retail petrol and diesel prices in Poland up by 15.8% MoM. As a result, annual fuel price inflation accelerated to 7.0% YoY in July from 1.3% YoY in June, contributing around 0.5-0.6 percentage points to headline CPI inflation."

"Fortunately, price pressures remain subdued elsewhere in the basket. Housing energy inflation eased slightly, reflecting lower prices of liquid fuels compared with June, while food price inflation continued to decline."

"We estimate that core inflation excluding food and energy edged up by 0.1pp to 3.1% YoY in July from 3.0% YoY in June, but we see no signs of broad-based upward pressure on prices. Annual inflation in the information and communication category increased slightly, driven by higher prices for computers, data storage devices and mobile phone services."

"Headline inflation remains within the central bank's target range of 2.5% ±1 percentage point despite the increase in fuel prices, and we believe that neither the current inflation picture nor the outlook warrants a monetary policy response. In our view, underlying price pressures remain contained, supported by moderating wage growth and a cooler labour market."