Analysts Warn That Disinflation May Slow Going Forward

The following summarises snap reactions of Polish research desks to the release of final June CPI data today. Headline inflation was confirmed at +11.5% Y/Y, with the official core inflation reading due Monday.

• ING estimate that core inflation may have eased to +11.1% Y/Y in June, based on the structure of inflation data. They think that the NBP is ready to lower rates in autumn, even as reaching the inflation target remains a distant prospect. They expect disinflation to slow in 2H2023.
• mBank see core inflation at +11.0-11.1% Y/Y and point to its declining momentum, noting that the commodity shock has reversed, while service providers are facing faltering demand. However, they believe that inflation may stop falling in spring 2024, as wage growth will remain elevated, while the NBP will cut rates.
  
• Pekao expect core inflation to print at +11.1% Y/Y and say that its decline was broad-based. They observe that the first fall in food prices in almost two years (not counting the implementation of the Anti-Inflation Shield) was wider than just seasonal adjustments to fruit and vegetable prices.
  
• PKO think that core inflation eased to +11.1% Y/Y in June from +11.5% prior, not only thanks to base effects but also to weaker momentum, as second-round effects and demand are faltering.
  
• The Polish Economic Institute write that core inflation is becoming increasingly significant and was around +11% Y/Y in June. They expect the decline in headline inflation to be notable slower in coming quarters and expect it to be above +5% Y/Y at the end of next year, with core inflation set to remain elevated until 2025.