The surprise acceleration of Polish inflation in May confirm the buoyancy of the economy but reflects mainly the impact of three temporary factors – global food and fuel price inflation and a rise in the VAT rate in January. These should start to unwind by the end of the year and we expect inflation to fall markedly. This underpins our continued belief that the higher rates the further rate hikes priced in by the markets will not be necessary to secure a soft landing for the real economy.
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