Inflation to exceed 7 percent in November, December: Polish Economic Institute

Inflation will go up further in November and December, as the price increase will exceed 7 percent, according to the forecast of the Polish Economic Institute (PIE) in the commentary to Monday's Statistics Poland (GUS) data regarding consumer goods and services.

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GUS announced that prices of consumer goods and services - Consumer Price Index (CPI) increased by 6.8 percent year on year and by 1.1 percent month on month in October 2021.

PIE pointed out that inflation in October rose to record levels.”This is the highest level since 2001. Core inflation increased to 4.6 percent. In the following months, CPI will exceed 7 percent. The price increase will slow down only next year,” PIE analysts stated.

It was emphasised that the price increase applies to a wide category of goods and services - over 70 percent of prices is rising at a rate exceeding the central bank’s inflation target (2.5 percent). “This is the result of both the shock increase in oil and gas prices in the world markets and the shortage of workers in the domestic labour market,” PIE noted.

According to analysts, inflation will slow down at the beginning of the year, albeit “slightly and gradual”. At the same time, the prices of basic necessities as well as energy prices will grow relatively quickly.

The price increase, PIE said, is also the effect of high demand. As a result, companies systematically increase employment, but at the moment, 30 percent of firms indicate difficulties with employing qualified workers as a barrier to growth. The Institute added that shortages in the labour market put pressure on wage growth, which additionally raises the prices of services.

According to PIE, inflation will remain above 5 percent next year and exceed 3.5 percent in 2023. In turn, it is to return to the limits of the central bank’s target in 2024 at the earliest.