Inflation accelerated less than expected in May, as it
inched up to 0.4% y/y from 0.3% y/y in April. Prices
were unchanged in monthly terms.
The falling transportation prices, down by 1.8% m/m on
4.2% m/m slump in petrol prices, had the biggest influence
on the positive overall result. The only remaining category
that saw a decline in prices was energy, down 0.1 % on
month. Clothing prices or the entire housing category stagnated, while food prices rose by 0.4% m/m. Food prices had already met the very low statistical basis from last year.
As a result, their y/y decline eased significantly from –3.5% y/y to –2.7% y/y.
Yesterday’s inflation should be another reason for the MPC to
make 25 bps rate cut next week. The inflation came out
lower than some MPC members estimated. Furthermore,
the changes in the overall inflation were driven by the contradictory movement of food and fuels prices, while the net inflation, in our opinion, was unchanged from April at
1.3% y/y. The MPC should be also appeased by the fresh
statement by the new finance minister, that the changes in
next year ’s budget would concentrate not only on the revenue side, but also on the significant reduction in spending.
Konrad Soszynski,Kredyt Bank S.A.,Warsaw
Jakub Dvorak, Investment Research, CSOB