Inflation in June, according to a preliminary reading by GUS, stood at 2.6%. This is an increase of 0.1 percentage points compared to May (on a year-over-year basis). Inflation rose despite some analysts not predicting any change and others even forecasting a decrease. Nevertheless, inflation remains low in the context of forecasts suggesting it could reach as high as 5% by the end of 2024.
On a monthly basis, prices in June increased by 0.1%. The rise in inflation is primarily due to a 0.7% month-over-month increase in food prices. It turned out that the effect of the VAT hike on food from April 1st spread out over a longer period. The price battle waged by large retail chains resulted in price increases in April and May being lower than the VAT hike. Hence the need for further increases in June.
In June, however, fuel prices dropped by 2.8% month-over-month (despite the global crude oil price rising from $78 to around $82 per barrel). Additionally, fuel companies decided to introduce extra summer discounts on fuel, the effects of which we will observe in the inflation readings for July and August. Energy carriers also became 0.1% cheaper month-over-month. However, this is only the “calm before the storm,” as electricity prices are set to rise significantly from July.
Thus, inflation is only slightly above the inflation target of 2.5% (with a deviation of 1 percentage point). Does this mean we can expect interest rate cuts by the Monetary Policy Council (RPP) soon? It seems that the most likely scenario is to keep rates unchanged until the end of the year. The RPP will probably monitor the inflation path further, especially from July when energy prices increase. However, other central banks lowering rates could put additional pressure on the RPP. June saw the first rate cut in the eurozone, and we expect a cut in the US after the summer.
According to the latest eToro Individual Investor Pulse survey, 27% of Polish individual investors (down from 31% in the first quarter of 2024) are most concerned about inflation over the next three months, ranking this factor as the top external risk. The second biggest concern, related to high geopolitical risk, is international conflict (25% of responses), while 10% of Polish investors fear the high level of interest rates in Poland.
Paweł Majtkowski, eToro analyst in Poland
