Poland's consumer price index dropped 0.2% y/y in October, trimming its fall from 0.3pp the previous month, statistics office GUS announced in a flash estimate on October 31.

Consensus had predicted prices would fall 0.3%. October was the third month in a row when deflation weakened and offered the shallowest deflation reading since the trend began in July 2014. With CPI moving in line with expectations of the Monetary Policy Council (MPC), and boosting expectations of an escape from deflation by the end of the year, a cut in interest rates appears unlikely as ever. 

That outlook is only strengthened by an economy still growing steadily. While economic expansion is unlikely to meet the government’s forecast of 3.4%, the more likely expansion of 3%-3.2% is still considered robust enough by ratesetters.

Analysts now claim a positive CPI reading is in sight, as fuel prices are growing at an accelerated rate. “We expect the coming months to bring further CPI growth … so that the index goes positive at the end of the year, or even in November,” BGK forecasts. In monthly terms, consumer prices grew 0.5%, GUS noted. Consensus predicted the rise in those terms would be limited to 0.2%.

Rate setters have maintained for months that the main drivers of deflation are external, and therefore CPI is unlikely to be sensitive to monetary policy. On top of their stated priority for economic growth over inflation targeting, as well as concern over financial stability in an already low-interest rate environment, that has helped the MPC shrug off pressure for easing.