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POLAND: Alternative Measures Of Core Inflation May Give Fuller Picture

POLAND

Official core CPI data for December will be published at 13:00GMT/14:00CET. The median estimate in a Bloomberg survey is +4.2% Y/Y, but the last estimate was supplied on Tuesday, before the publication of revised data yesterday. The final report from Statistics Poland was generally dovish, with the headline figure amended 0.1pp lower to +4.7% Y/Y. Sell-side analysts revised their estimates of core inflation. Based on our review of analytical notes released since yesterday (see here and here), most now see core inflation at around +4.0% Y/Y or slightly below that. This would represent notable deceleration from +4.3% registered in November, providing an argument to those members of the MPC who are looking to start a debate on rate cuts in the coming months.

  • On a related note, it is worth having a look at alternative measures of core inflation when the data comes out later today. The NBP publishes four such measures, i.e. CPI net of food and energy prices, CPI net of administered prices, CPI net of most volatile prices, and the 15% trimmed mean. While media outlets routinely cover only the most popular metric of core CPI (inflation ex-food and energy), the central bank monitors the other three gauges as well.
  • While it may not be a strong piece of evidence in itself, it is worth mentioning that a few weeks back MPC's Ireneusz Dabrowski reposted on X comments made by Puls Biznesu Chief Economist Ignacy Morawski to that effect. Morawski noted that the most popular measure of core inflation (CPI ex-food and energy) deviates to the upside relative to the other indices, which have been stable at low levels in the recent months. He added that "there is no reason to treat it as the best measure."
  • In the following weeks, Dabrowski used his X account to voice a view that "the supply-side shock has receded" and Poland is now dealing with second-round effects, which should dissipate in 2025 and 2026. He later wrote that "inflationary processes have been extinguished" and the measure of inflation is affected by regulatory and fiscal policies, which was interpreted as a dovish tilt in his rhetoric. Dabrowski is seen as a close ally of Governor Adam Glapinski.

 

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Official core CPI data for December will be published at 13:00GMT/14:00CET. The median estimate in a Bloomberg survey is +4.2% Y/Y, but the last estimate was supplied on Tuesday, before the publication of revised data yesterday. The final report from Statistics Poland was generally dovish, with the headline figure amended 0.1pp lower to +4.7% Y/Y. Sell-side analysts revised their estimates of core inflation. Based on our review of analytical notes released since yesterday (see here and here), most now see core inflation at around +4.0% Y/Y or slightly below that. This would represent notable deceleration from +4.3% registered in November, providing an argument to those members of the MPC who are looking to start a debate on rate cuts in the coming months.

  • On a related note, it is worth having a look at alternative measures of core inflation when the data comes out later today. The NBP publishes four such measures, i.e. CPI net of food and energy prices, CPI net of administered prices, CPI net of most volatile prices, and the 15% trimmed mean. While media outlets routinely cover only the most popular metric of core CPI (inflation ex-food and energy), the central bank monitors the other three gauges as well.
  • While it may not be a strong piece of evidence in itself, it is worth mentioning that a few weeks back MPC's Ireneusz Dabrowski reposted on X comments made by Puls Biznesu Chief Economist Ignacy Morawski to that effect. Morawski noted that the most popular measure of core inflation (CPI ex-food and energy) deviates to the upside relative to the other indices, which have been stable at low levels in the recent months. He added that "there is no reason to treat it as the best measure."
  • In the following weeks, Dabrowski used his X account to voice a view that "the supply-side shock has receded" and Poland is now dealing with second-round effects, which should dissipate in 2025 and 2026. He later wrote that "inflationary processes have been extinguished" and the measure of inflation is affected by regulatory and fiscal policies, which was interpreted as a dovish tilt in his rhetoric. Dabrowski is seen as a close ally of Governor Adam Glapinski.

 

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