Poland's CPI dropped 1.1% y/y in April, deepening 0.2pp on the reading from the previous month, statistics office GUS reported on May 12. The result confirms GUS’ estimate from late April, but the accelerating price fall remains unlikely to push rate setters into easing monetary policy.
The reading, which matches the consensus, shows the deflation trend continues to grow, regardless of hopes for a recovery of inflationary pressure. In monthly terms, consumer prices expanded 0.3%, GUS noted.
As has been the case for some time, prices in the transport sector drove the deflaton in April as they fell 8% on the year. The data includes a 12.3% decrease in prices of automotive fuel for private means of transport. Prices of clothing and shoes fell 3.9%, while those in the the recreation and culture segment dipped 2.9%. Food prices, however, grew 0.7%.
With the main driver of deflation outside the control of the Monetary Policy Council (MPC), rate setters are thought to remain unlikely to execute a rate cut as long as economic growth is unthreatened.
“Positive readings of CPI should come only in the fourth quarter. However, since deflation is supply-driven, the pace of economic growth solid, and the improvement of the situation in the labour market ongoing, we expect the MPC will not be in a hurry to cut interest rates. Cutting rates is unlikely anyway to exert influence on the real economy,” Bank Millennium writes.
That said, analysts have been consistently wrong in predicting the end of Polish deflation, having forecast throughout most of last year that prices would halt their drop before the end of 2015.