News & Analysis

This morning’s CPI release from Poland surprised to the upside as the YoY print came in at 10.9% vs 9.8% expected, while the MoM figure printed at 3.2%, also well above the consensus of 2.5%.

The figures came after February’s inflation moderated because of fresh government measures to shield, which included cutting the VAT on food, natural gas, electricity, and central heating to zero in February, while the rate on diesel and gasoline was brought down from 23% to 8%. Despite the implementation of the measures, March’s inflation still tracked above 10% amid upward pressure from gasoline and food prices.

This signals to us that a 50bp hike at next week’s meeting is a given, and the NBP’s wording around the forward guidance should assure markets of further robust rate hikes in order for the zloty to hold its ground.

March’s figures are compiled using the recently updated CPI basket weights, where the share of food has declined after having risen during the pandemic, while the share of services has now increased. This is because consumers are spending less on grocery shopping now than during the pandemic when Covid measures didn’t allow for eating outdoors, while at the same time, services spending was lower last year. The share of expenditure on house maintenance also increased mildly.

Taking into account the new weights, electricity, gas and other fuels increased by 23.9% YoY while food and non-alcoholic beverages rose by a smaller share of 9.2%. Fuels for personal transport equipment saw the strongest rise of 33.5%.

On April 19th, Poland’s core inflation measures are published, which should paint a clearer picture of underlying inflation pressures – something that would be more pressing for the NBP than just the rise in energy prices. Still, even the strong headline print provided a modest boost for the zloty and a more robust rise in the 2Y yield as the reading firms up expectations of next week’s 50bp rate hike.

Front-end polish yields and zloty rise as strong headline inflation supports 50bp hike next week



Ima Sammani, FX Market Analyst


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