Maja Goettig, chief economist at Bank BPH in Warsaw, comments on accelerating inflation in Poland and chances for further interest-rate increases.
The annual inflation rate rose to 5 percent last month, double the central bank’s target of 2.5 percent and the highest since August 2001, the Central Statistical Office in Warsaw said today. The median estimate of 28 economists surveyed by Bloomberg was for consumer price-growth of 4.6 percent.
Goettig commented by phone.
“We were just stunned by the figure. It exceeded the highest predictions on the market. It probably also surprised members of the Monetary Policy Council since in their comments they predicted the inflation peak at around 4.6 or 4.7 percent this year.
“The base effect was already included in our forecast, so we cannot blame the effect exclusively for such a rebound. In the second half of the year the base effect will have the opposite impact, meaning it will help inflation slow. But now we see that the inflation rate will decline much less than expected.
“It is possible that, at the end of the year, inflation will stay way above 3.5 percent, the upper end of the central bank’s target range, which seems to be the level acceptable for the council in current circumstances.”
On core inflation:
“While food prices take the main blame for the May headline figure, there is a chance vegetable prices will help trim the rate in coming months. On the other hand, today’s data support expectations for a significant increase in core inflation. According to our forecast, the May core-inflation rate could go up to 2.4 percent, which would be the highest since January 2010.”
On potential rate increases by the central bank’s Monetary Policy Council:
“We expect the Monetary Policy Council will take a pause in raising rates at its meeting in July. That would be consistent with the statement released by the council after the June meeting, as well as with comments” of central bank Governor Marek Belka, Goettig said. “Our base scenario is another rate increase around September.
“On the other hand, bad news like we have seen today may increase the probability of a rate increase in July. It cannot be ruled out that after seeing inflation at its highest since August 2001, the council may need to reconsider its wait-and-see plan.”
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