Headline Inflation Prints Below Expectations, Core Seen Around +3.8-3.9% Y/Y

Preliminary data showed that Poland's headline inflation undershot expectations in May, printing at +2.5% Y/Y (i.e. right at the NBP's point-target). Consensus was looking for an acceleration to +2.8% from +2.4% registered in April. On a sequential basis, prices ticked higher by just 0.1% M/M versus +0.5% expected and +1.1% in April.

• ING call the price increase in May "symbolic," noting that small declines in fuel and heat prices were coupled with a very small rise in the costs of food. Per their calculations, core inflation may have fallen to around +3.8-3.9% Y/Y. They note that a slightly slower sequential core inflation (+0.2% M/M) is typical for May. They maintain their call for stable rates through the rest of 2024 as the economy is rebounding.
• mBank estimate that core inflation fell further to +3.8% Y/Y from +4.1%, while noting that it is difficult to say how the reaction in food prices to recent VAT adjustments played out before the publication of detailed data.
• Pekao suggest that core inflation fell to +3.9% Y/Y, adding that forecasts suggesting that headline inflation could end the year at +6-7% Y/Y are "going through a difficult time."
  
• PKO write that prices rose 0.1% M/M mostly on the back of an increase in food prices, which was largely neutralised by cheaper fuel and heat.
  
• The Polish Economic Institute write that core inflation likely fell to around +3.8% Y/Y. They note that food prices ticked higher by a small margin, despite a higher VAT rate. They believe that June will be the last month with inflation within the NBP's target. CPI may accelerate to +4.0-4.5% Y/Y in July due to the adjustments to energy price caps. A rebound in core inflation cannot be ruled out due to wage pressures. The Institute warn that 2H2024 will also bring higher inflation.

Source: MNI - Market News/Bloomberg