Figures for December show that inflation in Poland reached its highest level since 2012 and exceeded the predictions of the market consensus, according to a flash estimate by Statistics Poland, a government agency.

The consumer price index (CPI) inflation rate reached a year-on-year level of 3.4% in December, compared to 2.6% in November. That 0.8 percentage point rise was also the largest December increase since at least 2000, notes the Rzeczpospolita daily.

Rising food prices are the main reason for the climb, according to Business Insider Polska. Experts also warn that the trend is likely to continue in the coming months. In November, the IMF forecast that Poland would have the highest inflation in the EU in 2020.

December’s figures show that the prices of food and non-alcoholic drinks rose by 7% in year-on-year terms, while those of energy carriers and of private means of transport dropped. In monthly terms, food prices increased by 1.2%, while energy carriers and transport also became more expensive.

Business Insider reports that the market consensus had put the likely year-on-year inflation rate at 2.9%. The website quotes Polish analysts as saying that even worse inflation is in store for the first quarter of 2020, when it could reach 4.5%, finishing the year at around 3% or even, according to the IMF, 3.5%.

Analysts from mBank noted that increased costs of electricity, waste removal and a new excise duty on alcohol and tobacco are likely to contribute to the further rises.

Their counterparts at Santander report that the factors that caused increased food prices will continue to have an impact. There are ongoing problems with African Swine Fever, decreased pork production in China, and sugar shortages in Thailand and India. Cereal prices have risen, and potential further weather anomalies will only worsen the situation.

The flash estimates raise the question of the response of the Polish central bank’s Monetary Policy Council (MPC), which has set an official inflation target of 2.5%. Despite increasing concerns, the central bank concluded 2019 with exactly the same GDP forecasts for the next two years as the previous year and with lower forecasts for CPI inflation: 2.3% in 2019, 2.8% in 2020, and 2.6% in 2021.

According to mBank’s economists, however, the new data will make the MPC uncomfortable: “While the general model of thinking about the economy and inflation processes has not changed at the MPC, the scale of surprises that have occurred already and will do soon should activate the hawkish wing of the council.”

As Maria Wilczek wrote for Notes for Poland last month, 2020 is likely to be an expensive year for Poland.

Main image credit: Narodowy Bank Polski/Flickr (under CC BY-ND 2.0)

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