Citi Handlowy: The new price of energy and VAT on food will increase inflation at the end of the year

Luc Williams

Electricity prices will be unfrozen in July, most likely adding 0.6-1.2 percentage points. untilmain CPI. Taking this into account, as well as the already increased VAT on food (~+0.5-0.6 percentage points), we see inflation at 4.4-5.1% by the end of the year. The government has published the first details on the scale of energy price increases. According to the document, from July, the price of electricity will increase to PLN 500/MWh from the current one 'frozen' level of PLN 412. This means 24 percent. increase in electricity prices, much less than 60%. correction if prices could rise to unfrozen levels,” we read in the bank's commentary.

Additional fees will increase energy prices

Citi Handlowy indicated that the final impact on household bills will also depend on distribution feeswhich are unknown at this stage.

“In general, the government's announcement reduces uncertainty about the future level of inflation, but still leaves some questions unanswered,” it was emphasized.

Inflation according to NBP assumptions

“Before NBP estimated the range of inflation levels at the end of 2024 at around 3.8-7.8%, while now we see CPI in a much narrower range of 4.4-5.1% (December 2024). This should be high enough to maintain a hawkish tone MPC in the coming months. We expect that interest rates in Poland will remain unchanged at 5.75% throughout the year,” the commentary concluded.

According to the latest estimates of the National Bank of Poland (NBP), consumer inflation will range between 3.9% y/y (if the currently applicable anti-inflation shields are maintained) and 7.5% (if they are completely abolished) at the end of this year. In March, consumer inflation amounted to 2% y/y (compared to 2.8% y/y in February).



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