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Inflation Plunges in Poland: Reaching the Target, But Yo-Yo Looms?

ECONOMYInflation Plunges in Poland: Reaching the Target, But Yo-Yo Looms?

It seems that we are rapidly getting close to the inflation target. The question is, will the yo-yo effect catch us after such a strong decline? Fortunately, inflation is not about losing weight.

Inflation 3.9%

We all knew that inflation in Poland for January should significantly drop. A certain problem in forecasting was the simultaneous annual basket change. The 3.9% result is obviously a very good outcome. However, surprisingly it’s not far from the predicted 4.1%. That’s why there were no excessive reactions in the currency market. The zloty exchange rate hardly twitched. However, this is a very important reading for the future. It will certainly be confronted with the latest statements by the president of the NBP about the lack of interest rate cuts. However, it should be remembered that we still refer in an annual perspective to the peaks in February, so the February reading will probably be lower. But then the reference point will be steadily lower levels, which should also affect the annual change.

Data from the USA

Yesterday’s data largely hindered the dollar. It started with a strong blow in the form of a 0.8% monthly drop in retail sales. Then this data was somewhat tempered by the NY Empire State index, which turned out to be less bad than expected. This was followed by better than expected jobless claims. This, in turn, was overshadowed by weaker than expected industrial production. As a result, the dollar lost again against the euro. Thus, within two days, the main currency pair returned to the vicinity of the point where it started before the publication of the US inflation data, which significantly strengthened the dollar.

Inflation in Europe

Yesterday was not only about data from Poland. Readings in the Czech Republic, Slovakia, and Spain were also published. Our entire region is currently in a trend of a strong decrease in the rate of price growth. In the Czech Republic, inflation fell from 6.9% to 2.3% and, like in Poland, it was a decline stronger than expected. However, as in Poland, it did not have a significant impact on currency markets. In Slovakia, the decline was from 5.9% to 3.9%. Quite in contrast is Spain. Inflation in this country not only did not fall significantly, but it rose from 3.1% to 3.4%, in line with analysts’ expectations.

Maciej Przygórzewski – chief analyst at and

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