The latest GUS figures indicate that in September the prices of goods and services fell by 0.8 percent compared to the analogous period the year before – confirming earlier, tentative estimations. – The signals suggesting that the process of easing the pressure on price cuts is slowing down are being confirmed. Base effects will be increasingly favourable for a gradual ending of year to year inflation, but we have to be ready to deal with low prices dynamics for the next few quarters – comments Łukasz Kozłowski, expert of Employers of Poland.
Similarly to recent months, deflation is caused first and foremost by falling prices of fuel and food. This year’s draught led to restricted agricultural production, while globally we are now dealing with an increasingly rapid drop in food prices. Oil prices should stay at a lower year to year level at least until December or January. What is more, base inflation figures presented by the National Bank of Poland in August show that prices start to drop slightly in a month to month perspective. Thus, deflation starts to spread to other consumption goods.
As long as the CPI inflation dynamics remains low or we are dealing with inflation, one should not expect the Monetary Policy Council to raise interest rates, as it would run the risk of causing a deeper drop in prices. Given that we are faced with low global inflation, it is more and more likely that Poland’s monetary policy will not be tightened in 2016 either. The fact that consumer inflation is lower than expected is also a cause of concern for the government, as the income and spending plan for the budget was based on the assumption that average annual price growth would 1.7 percent – an assumption which is looking increasingly unlikely to be proven accurate.
Łukasz Kozłowski, economic expert of Employers of Poland