Record-breaking increase in core inflation in Poland

In August, inflation in Poland reached a record 16,1 percent. Core inflation was also record-breaking, reaching 9,9%. y / y Polish inflation combines the worst features of that of the USA and Europe - high core inflation and a high increase in food and energy commodity prices.

Record-breaking rise in core inflation

Core inflation is a measure of price growth devoid of the most volatile elements of the inflation basket. In practice, this means that it is an increase in the price of all goods except food and energy, the prices of which may fluctuate the most. In Poland, core inflation is calculated by National Bank of Poland on the basis of data from the Central Statistical Office. Core inflation represents that part of inflation affected by interest rate increases.

The core part of inflation is the one that is also the hardest to fight. The relation between the CPI inflation value and core inflation allows us to state how persistent the price increase is and how quickly possibly inflation may start to fall. Europe is currently dominated by energy-driven inflation - that means even how CPI inflation is high, core inflation remains relatively low.

Not better in the eurozone

In August, inflation in the euro area stood at 9,1%. y / y, of which core inflation amounted to 4,3% and the increase in food and energy prices was 4,8%. The United States is also experiencing a global increase in energy commodity prices, but remains immune to shocks related to the situation on the European natural gas market. This is why inflation in the US is less influenced by rising energy prices, from 8,3% to ca. y / y the annual price increase in August, 6,3% is core inflation, and only 2 percent. this is an increase in energy prices. The US core inflation is influenced by the very good situation on the labor market with strong pressure on wage growth. Added to this is also 20 percent. increase in house prices y / y.

High core inflation in Poland

How does Poland look against this background? It turns out that we combine the negative features of inflation in the US and Europe. Polish inflation, like in the US, is characterized by high core inflation, which in August amounted to a record 9,9%. y / y. It is also the effect of the practical lack of unemployment and growing wage pressure, and also the effect of a significant increase in the cost of living and increases in rents. As in Europe, we also have a significant increase in the prices of energy and food - they are responsible for the increase in inflation by 6,2%. y / y And the highest increases related to the increase in the prices of the most popular energy resources: natural gas and coal are still ahead of us. This points to the need for further interest rate hikes by the MPC.

High core inflation also means that inflation will decline slowly and even if commodity prices drop significantly, core inflation will keep inflation above the target for a longer time. Of course, the question of when the recession will appear, which will also affect the level of inflation, remains open.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.