Inflation at 5% y/y in May, the highest in ten years

Inflation at 5% y/y in May, the highest in ten years, as announced by the statistical office on Wednesday, is unsettling not only with respect to its level, but also its structure, Fortis Bank chief economist Marcin Mroz commented for the daily Puls Biznesu.

Not only prices of food and fuel are going up, which is a global trend, but other categories of goods are becoming more expensive as well, which points to domestic inflation pressure, he explained.

The inflation reading made an interest rate hike in July more probable, Invest-Bank economist Adam Czerniak said. By the end of the year there may be two hikes instead of one, Mroz predicted.

The Monetary Policy Council will, nevertheless, stick to its decision to make a pause in the tightening cycle, as monetary policy is about long term changes, not one-off data, even if surprising, TMS Brokers economist Krzysztof Wolowicz said.

The statements of rate-setters after the inflation data release mean that the interest rates will probably not be hiked for the fourth time in a row, chief economist at BRE Bank told daily Rzeczpospolita.

There are three months ahead, during which changes in food prices may have a significant influence on inflation and it is expected that the rate setters will want to see what happens, chief economist at state bank BGK Tomasz Kaczor told Parkiet daily .