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Inflation in Poland. Goldman Sachs: inflation will increase in February, but still in the first half br. will start to drop significantly

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Headline inflation will increase in February, which will be a consequence of the expiry of the reduced VAT rates, but it should start to decline clearly in the first half of this year, economists of the Goldman Sachs bank assessed on Wednesday in their commentary on the Central Statistical Office’s data on inflation.

The Central Statistical Office announced on Wednesday that inflation in January was 17.2% year-on-year.and compared to the previous month, prices increased by 2.4 percent.

Inflation in PolandPAP/Adam Ziemienowicz

GS experts noted that the January inflation reading in Poland is lower than the bank’s forecasts (17.7%) and the market consensus (17.6%). According to analysts, an increase in inflation from 16.6 percent. in December 2022 to 17.2 percent. in January this year results, among others from higher dynamics of prices of energy carriers (34.0% y/y) and transport fuels (18.7% y/y). In both cases, the increase in inflationary pressure resulted from the expiry of the reduced VAT rates. Economists also noted that food pressure decreased by 0.8 pp. to 20.7 percent y/y, while core inflation increased by 0.3 pp. to 11.8 percent y/y

Inflation in Poland will increase in February

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According to GS forecasts, headline inflation will increase in February, which will be a further consequence of the termination of the anti-inflationary shield. Experts stipulated that in the first half of 2023 the price growth rate should start to decrease markedly as the inflationary pressure from energy prices fades and food price growth normalizes. The disinflationary trend will be partly limited by e.g. persistently high wage pressure.

In the opinion of analysts, the National Bank of Poland will probably keep it interest rates at the current level. The main factor that could persuade the central bank to resume interest rate hikes, as advocated by GS, may be pressure in the currency markets. Experts pointed to a clearly weaker one zloty quotes against the Czech koruna and the forint.

Main photo source: monticello / Shutterstock

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