Local Analysts Say CPI Re-Weighting Caused Unexpected Downward Revision To January Reading

Local analysts released their comments on Polish inflation data for February and the revised January reading, taking note of the unexpected impact of CPI basket re-weighting.

• mBank analysts note that "the peak of inflation has the height of +18.4% Y/Y. The pace of decline will be quick in the coming months, and then will slow notably as the base effects dissipate. The expected upward revision due to the re-weighting turned out to be a... downward revision and a solid one (-0.6pp). This is the largest revision in the history of Polish inflation studies." They note that the main takeaways from the data are (1) core inflation lower than in the NBP projection and (2) the dovish camp can be happy.
• Pekao note that "contrary to expectations, flash January CPI reading was... lowered by 0.6pp to +16.6% Y/Y Meanwhile, in February inflation went up to +18.4%. We have reached the peak of the cycle." They add that "with the beginning of March, we will enter the disinflation phase, albeit its pace will be hindered by sticky core inflation. Considering today's data, we estimate that in January [core inflation] quickened to +11.6% Y/Y in January and to +11.7% in February."
• The research desk of PKO writes that the "annual revision of the inflation basket lowered CPI inflation in January 2023 by 0.6pp - the most in modern history (...) The largest increases were in expenditures on food (+0.4pp) and transport (+0.38pp)." They say that "from March inflation will fall quickly - towards single-digit levels at the end of 2023."
  
• ING analysts suggest that "not everything looks so good, the monthly increase in inflation was larger than we were expecting (+1.2% M/M versus expected around +0.9% M/M)." They add that "core inflation is also increasing strongly."