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Weak zloty fuelling inflation


The acceleration in consumer prices in November proved much sharper than anticipated. A lower comparative base is only a small part of the explanation; the key factor was a substantial depreciation of the zloty during the past few months.

The main contributors to the November spike in the consumer price index (CPI) were the prices of food, fuels, and health products and services. While it is normal for food prices to rise at this time of year, the surge in fuel prices was driven chiefly by the weaker zloty. Meanwhile, the sharp quickening of price growth in health products and services, and particularly in pharmaceuticals (up by a hefty 3.8% compared with October) was a consequence of the coming into force of new lists of reimbursed medicines effective from 16 November.

In our view, though a rising comparative base will exert a moderating pressure on consumer price growth in the coming months, its effect is likely to be largely neutralised by the weak zloty. (No substantial strengthening of the Polish currency is to be expected until the debt crisis in the eurozone is resolved). And there will be other inflation-boosting factors as well, namely an increase in electricity tariffs and a rise in the excise duty on tobacco products and diesel oil from January 2012. Therefore the CPI is unlikely to get back within the central bank’s target range of 2.5% y-o-y +/- 1 p.p. in the nearest months. According to our forecasts, a more pronounced fall in inflation will occur only in spring of 2012.

Paweł Sionko
Construction Market Analyst, PMR

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