Gov't Decides To Retroactively Lower Electricity Tariffs Which May Affect Inflation

Poland's Climate and Environment Ministry released a decision retroactively lowering electricity tariffs for households but there is some controversy over its potential impact on inflation. The tariffs will be lowered by 12% counting from the beginning of this year. The earlier proposal to cut them by 5% was rejected by the Senate, with the government choosing an alternative route to trim electricity costs for households.

• Santander describe the solution as a "de facto lump-sum benefit for energy consumers, not linked to their actual consumption, so it can hardly be described as a price change". They think that the statistics office should not take this measure into account when calculating inflation, but the possible inclusion of the measure would lower headline inflation by around 0.2pp.
• ING note that the Ministry's decision retroactively lowers energy costs for households by 12%, which should reduce CPI inflation by around 0.3pp. The net impact on their expected inflation outturn for September is around -0.1pp as they previously assumed a 5% drop in energy tariffs from this month. They expect inflation to print at +8.5% Y/Y in September.
• PKO write that the Ministry's decision will take effect within 7 days from its announcement and they estimate that it will lower CPI inflation from September by around 0.5pp.