Inflation remains high and there is no indication that it will stop in the long run.
Inflation remains high
We already know the preliminary data of the Central Statistical Office on inflation. In October, consumer prices went up 3.0 percent, according to the report. Every year. The information was provided by the Central Statistical Office on Friday as part of the so-called quick respect. Compared to August, prices are 0.1 percent higher.
In turn, a month ago, annual inflation was 3.2 percent. Back then it was a record in Europe.
However, it is worth recalling that we will know the exact calculations in about 14 days. It is doubtful that they will turn out to be completely different.
Why is inflation rising?
Theoretically, in the current crisis, inflation should not rise because consumers spend less. Only that, as we have already written, central banks and governments probably want to “print” this crisis. Empty money goes to the market. And it is not only about the policy pursued by the National Bank of Poland, but also what we see in the US or the EU.
Our central bank wants to save markets that are suffering from restrictions. In September alone, the money supply (M1 – currency and current deposits) increased by as much as PLN 25 billion, i.e. by 1.7%. This is nothing, because from the beginning of the year by PLN 299 billion, i.e. 25.9 percent. Thus, the supply of currency increases, and this – according to economic laws – must lead to price spikes.
It is also known that electricity has been rising the fastest recently, and this must start to affect the prices of all products and services. A year ago, we paid for it by as much as 4.8 percent. less. Compared to September – by 0.3 percent.
In addition, from January 1, 2021, we will start paying the so-called “Capacity fee”, which was originally supposed to come into force in October. Date changed due to a pandemic.
MBank Research analysts believe that they were surprised by the increase in energy prices. They believe that by the end of the year inflation will fall within the NBP’s target, i.e. at 2.5%.