Inflation Rebounds From Trough, Timing Of Pass-Through From VAT Hike Under Microscope

Poland's CPI inflation accelerated to +2.4% Y/Y in April from +2.0% prior, printing slightly below the +2.5% consensus forecast. Prices increased by 1.0% M/M in April, missing the median estimate of +1.1%. The data come from a preliminary report. with final readings due on May 15. Note that prices were boosted by the re-introduction of 5% VAT on food and an uptick in fuel prices. Prior to the release, mBank analysts described analysts' forecasts as "betting on the [extent of the] pass-through from the change in VAT to food prices" (for the record, they thought it was around 50% in April, with the remainder left for May and June).

• ING note that the trough in inflation is behind us as the VAT hike boosted food prices, which rose 2.1% M/M. Core inflation fell to around +4.0% Y/Y in their view and should start stabilising in the coming months.
• mBank write that that their estimate of a 50% pass-through from the VAT hike seems to have been correct, with fuel prices also providing no surprise (+2.1% M/M). They were surprised, however, by lower energy (-0.2% M/M) and core CPI (+0.6% M/M and +4.0% Y/Y).
• Pekao estimate the pass-through from the higher VAT rate at around 65%, which boosted headline CPI by 0.5pp in April. They expect the remainder (0.3-0.4pp) to show in inflation readings in the coming months. Core inflation fell to around +4.1% Y/Y in their view.
• PKO write that food prices rose by "just" 2.1% M/M, which is responsible for a slight miss in headline CPI relative to their and consensus forecast of +2.5% Y/Y. They note that the pass-through is more spread out in time than initially assumed.
  
• The Polish Economic Institute note that inflation rose to +2.4% Y/Y mostly due to the increase in food prices reflecting a higher VAT rate, but also more expensive fuel. Core inflation cooled to +4.2% Y/Y, per their calculations. They expect inflation to keep rising in 2H24 but believe that BBG consensus (CPI at +4.7% Y/Y in 4Q24) is too pessimistic as the prices of goods will likely be lower.