POLAND: Food Prices Increase Slightly More Than Expected

Poland's headline inflation ticked higher to +2.6% Y/Y in June, according to a flash estimate provided by the statistics office, which was in line with the consensus forecast. The sequential figure printed at +0.1% M/M, marginally missing Bloomberg median estimate of +0.2%. 

• ING note that the seasonal decrease in fruit prices took place earlier and we are now observing a rebound which was not there a year before. They see core inflation at +3.6%-3.7% Y/Y.
• mBank were surprised by the relatively large increase in food prices (+0.7% M/M), which they see as a potential sign of the delayed transmission of the April VAT hike to retail prices. They esstimate core inflation at +3.6%-3.7% Y/Y, with momentum at +0.3% M/M. Annualised, this would give a result slightly above the NBP's inflation target range.
• Pekao write that food price inflation provided a surprise and was the reason why their +2.3% Y/Y forecast undershot the actual reading. In their view, headline inflation will reach +4.3% Y/Y at the end of this year.
• PKO note that food prices increased by a decent margin (+0.7% M/M) for this time of the year, which can be partly attributed to the delayed impact of the VAT hike. They reiterate that this is the last month this year when inflation is within the +/-1pp tolerance band around the NBP's +2.5% Y/Y target.
• The Polish Economic Institute write that the reading was weighed on by lower fuel prices, despite an uptick in food prices. They estimate core inflation at around +3.7% Y/Y. They expect inflation to accelerate beyond the NBP's tolerance band from July but think that over the longer term the decision to unfreeze energy prices will help bring inflation back to the target. Sticky core inflation, supported by robust wage growth, remains the key risk.