In Poland, the energy shield withdrawal brought to an end the temporary gas and electricity price freeze (a maximum price of PLN500/MWh), raising average bills and bumping up the annual inflation rate by about 1.4 percentage points compared to June. Prices for house energy rose 11.8% MoM and 10.0% YoY in July. In addition to energy prices, the cost of housing should also rise in the coming months due to higher prices for water supply and sewage collection.

Food and non-alcoholic beverage prices declined by 0.5% MoM in July, but the scale of the decline was lower than a year ago (-1.2% MoM). This translated into an increase in the annual price growth in this category to 3.2% YoY. The increase in the annual rate of growth of food prices bumped up annual CPI inflation by about 0.2ppt relative to June. ING estimates the core inflation in July was at a similar level to June at 3.6-3.7% YoY, but the MoM seasonally adjusted core was less benign than in the year’s second quarter.

Given the low reference base of the second half of last year, analysts expect yearly core inflation to keep increasing in the coming months. Their assumption is a decreased risk of core reacceleration given the depressed global growth picture, which may undermine companies’ pricing power.

The materialization of deferred inflation on energy carriers should translate into annual CPI remaining elevated over the next 12 months. ING forecasts that by the end of 2024, official inflation may fluctuate in the range of 4-5% YoY, with a peak in the first quarter of 2025 at around 5-6% YoY.

The peak in inflation will depend on whether the government will decide to reinstate the energy shield measures into 2025. As the law stands now, the PLN500/MWh maximum price for electricity and the exemption from the continuity fee are effective until the end of 2024.

Analysts expect the MPC to maintain its hawkish stands amid high headline inflation, and any discussion of monetary easing is unlikely to begin before inflation passes its peak. The National Bank of Poland’s hawkish bias increasingly stands out against other central banks in the region where steam has recently been added to the prospect of easing cycles, as well as developed market central banks whose easing cycles are now on the horizon.

Only rhetoric is temporary, the effectiveness of the results will only be judged by the proof of the facts.