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 .

Elevated Food Prices Seen as CPI Risk Factor in Coming Months

Elevated food prices may constitute an inflation risk factor in coming months, Finance Ministry deputy statistics director Slawomir Dudek told PAP Polish News Agency.

Poland's consumer inflation measured 2.9% y/y in October, on a 0.6% m/m price increase, latest estimate by the Finance Ministry showed.
According to Dudek, food prices grew by 1.4% m/m in October. 

Other price increases that contributed to October inflation spike included 1.1% m/m growth in clothes and footwear and 2.9% m/m increase in gas prices.

Food Gets More Expensive in Poland

Poland's food prices likely increased by at least 0.5 percent m/m in September, farming business institute IERiGZ expert Krystyna Swietlik told PAP Polish Press Agency on Monday.

"In September, food prices grew by 0.5 percent, or even more, driven by cereals, butter and pork, which gained 1 percent. The demand factor was also important: people came back from their vacation in September, and the demand for food grew," Swietlik said.

"The prices of fruits and vegetables did not grow in September, but they will start doing so now," she added.

The coming months may bring a 2-3 percent growth of the prices of bakery products, as Polish grain crops this year were poorer than in the year prior, Swietlik said.

Poland's grain crops may have amounted to 27.3 million tons, on a 8.5 percent y/y decrease, according to stats office GUS' September estimate.

Deputy Agriculture Minister Artur Lawniczak sees the grain crops even lower, at some 26 million tons.

PGNiG Obtains Regulatory Approval for Gas Price Hike

Poland's energy regulator URE approved a 6.4% gas price hike for listed gas giant PGNiG effective from October 1, 2010, to March 31, 2011, URE announced in a press statement.

As the increase pertains only to the price of gas and not other elements of the tariff, gas bills for households will increase on average by only 2.5%, while the biggest recipients of high-methane gas will suffer a 6% hike, URE statement read.

"The amount of savings gained thanks to cutting the original motion by PGNiG is estimated at around 475 million zlotys," URE said of savings on the client side.

PGNiG had motioned for a 10% hike but was called on by the regulator to tone its demands down.

Significant Rise in Petrol Prices Expected in Poland Next Year

Fuel prices in Poland are set to increase considerably in 2011, regardless of potential oil prices hikes on the global markets, the daily Dziennik Gazeta Prawna writes.

In the pessimistic scenario the price 1l of petrol will increase by PLN 0.2, the daily calculates, taking into account expected VAT hike, changes in mandatory fuel reserves and new regulations regarding biofuels.
Such prices hikes will translate into higher inflation.

Poland's Energy Prices Expected to Grow by 5% in 2010

Poland's energy prices may grow by 5% on average in 2010, with 5.8% electricity price growth and gas price increase following motion filed by gas company PGNiG to energy regulator URE, economists estimate as cited by the daily Rzeczpospolita.

Restaurant services are expected to see some 3.5% price growth with prices 3% up in transport. Price declines are expected i.a. in clothing and electronics.