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Inflation in Poland. Commentary by Piotr Bartkiewicz

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In the data from the beginning of the year, there is no clear disinflation, said Bank Pekao economist Piotr Bartkiewicz. He added that the market noticed it and as a result, the expectations of interest rate cuts this year disappeared from the valuation of financial instruments.

“To be honest, there is no clear disinflation in the data. Yes, it is visible in the fact that enterprises and households do not expect higher inflation, that analysts see a drop in inflation this year and that it is actually lower than it was at the peak, and that the April reading will probably also be lower, because around 15 percent,” said Piotr Bartkiewicz, an economist at Bank Pekao.

Inflation – scenarios

In March, inflation amounted to 16.1 percent, while in February it was 18.4 percent. In turn, core inflation, calculated without taking into account food and energy prices, amounted to 12.3 percent in March. compared to 12 percent. in February. – The data on inflation do not show a decrease in the fundamental price pressure, inflation is widely spread and has settled at the level of approx. 10-12 percent. We are currently waiting to see whether the economic downturn will be enough to curb the inflationary pressure, what the inflation situation will look like abroad and whether global trends will come to us, and whether it will turn out that the cut energy prices will contribute to a decrease in inflation in the same way as the increase in energy prices previously contributed to its increase – said Bartkiewicz. The economist added that although analysts predict a decrease in inflation, there is no consensus among the forecasts available on the market as to what inflation will be at the end of the year. – Currently, the optimistic scenario is one that says that inflation will fall to a single-digit level at the end of the year. The scenario close to the market average assumes a decrease in inflation to around 10 percent at the end of the year. But there are those who believe that inflation at the end of the year will amount to 13-14 percent, he said.

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Loss of faith in rapid disinflation

Piotr Bartkiewicz pointed out that when inflation rose to over 20% at the beginning of the 21st century, it took at least 5 years to bring it down to a level consistent with the MPC’s goal. – On the one hand, we are now a more developed economy and the transmission of the activities of the Monetary Policy Council to the economy is better. On the other hand, we know that neither fiscal nor monetary policy has been tightened to such an extent as in that period, reminded the economist. He admitted that recently it has been seen that analysts dealing with the Polish market are losing faith in quick disinflation, which can be seen in the change in expectations regarding interest rate cuts NBP. – The interest rate cuts have already disappeared from the valuation of financial instruments this year, although the valuations still indicated significant reductions. The market sees that there is a problem with inflation and that the data from the beginning of the year indicate that this problem will not be solved quickly, said the economist of Bank Pekao. He added: “We still forecast one, signal interest rate cut, but we are considering an increase in inflation expected by us at the end of the year.”

Read also: How much will inflation in Poland be? There is a new NBP report

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