The StatOffice confirmed that headline inflation in June inched up to 4.1% YoY from 4.0% YoY in May amid higher services prices (6.3% YoY vs. 6.0% YoY) and a slowing annual decline in fuel prices. We estimate that core inflation, excluding food and energy prices, increased to 3.4% YoY from 3.3% YoY in May due to rising prices of services linked to foreign tourism (7.1% month-on-month) and transport (5.5% MoM).
The market’s attention is currently focused on the July inflation reading (due at the end of the month) when a marked decline is expected because of the high base effect from July 2024 when there was a partial liberalisation of household energy prices. We anticipate that the MoM price increase this July will be significantly lower than in July last year when prices rose by 1.4% MoM. This should bring the annual inflation rate down to below 3% YoY.
The capacity fee was reinstated this month, which for the average household consuming electricity means an increase of PLN11.14 net a month. At the same time, new lower gas tariffs for individual consumers have come into effect. As a result, the rise in energy carrier prices compared to June will be benign, and in annual terms, the rate of increase will fall from around 13% to low single-digit levels.