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2021/12/20 / Erste Group Research

Poland Weekly Focus | Energy price increases shift inflation path up

Massive energy and gas price increases for households announced by the regulator. We revise our FY22 and FY23 inflation forecast up to 7.8% and 4.4%, respectively. Central bank to tighten monetary conditions more aggressively. We see the key rate at 4.0% by the end of 2022.

Forecast revision | Energy regulator accepted massive increases of electricity and gas prices for households from January 2022. The Polish energy regulatory office accepted a massive increase of gas and electricity prices for households as of January 2022, due to high energy costs on the wholesale market and surging prices of CO2 allowances. The new tariffs will result in an increase in energy bills for households on average by 24% y/y and gas bills by 54% y/y. Part of the increase in energy and gas prices will be offset by the measures introduced within the anti-inflation shield. For the period of Jan-Mar 2022, the VAT rate will be lowered from the current 23% to 5% for energy and to 8% for gas. Moreover, for the period Jan-May 2022, excise duties on energy will be lifted for households.

The announced increases will shift next year's inflation trajectory up by about 1.5pp. If the anti-inflation shield remains in place only in 1Q22 and shaves off at most 1.5pp from the headline figure, we expect FY22 inflation on average at 7.8% and FY23 at 4.4%. The headline CPI should peak at about 9% y/y in April 2022 and start to gradually decrease thereafter. Nevertheless, reaching of the upper bound of the central bank’s inflation target by the end of 2023 might be hard to achieve.

Although the latest shift of the inflation trajectory is driven by non-core items, the current level of inflation is too high and the National Bank of Poland will have to react and tighten monetary conditions more aggressively, in order to limit the risks of de-anchoring of inflation expectations. Therefore, we expect the key rate to reach at least 4.0% by the end of 2022.

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General information

AuthorErste Group Research
Product nameCEE Country Update
Topic in focusMacro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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