Santander BP: Inflation may fall below 3 percent in August after URE decision

Following the URE decision, Santander BP economists have revised their CPI inflation forecast; the current estimate assumes a drop in the price index to 3.0% y/y in July and to 2.8% y/y in August - according to the bank's morning report. Economists indicate that the August reading may be this year's minimum.

"We estimate that the impact of the lower tariff on CPI inflation will be slightly over -0.2 percentage points and will be visible already in July. Since we did not anticipate this decision in our baseline scenario, it lowers our inflation forecast in July to 3.0% y/y and in August to 2.8% y/y, which could be this year's minimum," economists wrote in a morning note.

"We expect, in line with our current inflation scenario, that a decision to reduce electricity tariffs may be made in the coming days or weeks and that it will bring prices (currently close to PLN 640/MWh) close to the level of the maximum price set by the government and currently in force, equal to approximately PLN 500/MWh," they added.

The President of the Energy Regulatory Office has approved the PGNiG Obrót Detaliczny tariff for the sale of gas to households and certain categories of eligible customers. From July 1, 2024, the price of gas for households will drop by approximately 14.8 percent to PLN 204.26/MWh. Subscription fee rates have remained unchanged.

Economists at Santander BP estimate that after inflation fell below 3% y/y in August, the coming months may see a slight increase - CPI may end the year at 3.2% y/y.

"We still believe that the Monetary Policy Council will not consider cutting interest rates in June. However, the chance for such a discussion will be much greater in July, when the new NBP projection will be published," economists point out. (PAP Biznes)

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