Poland’s consumer price index (CPI) fell 0.8% y/y in February, according to data released by the Polish statistical office GUS on February 12. The persisting deflation is, however, unlikely to spur the new-look Monetary Policy Council into action, as rate setters have reiterated recently that low inflation is caused by external factors.
 
The February result showed deflation slowing a little from the -0.9% seen in January. The data for the first month of the year was updated from -0.7% following a change in GUS methodology.

In monthly terms, prices fell 0.1%. As in January, the February fall was driven by prices in the transport sector, which dropped 7.3%. That included a reduction of 11.3% in the prices of motor fuel. A 4.5% decrease in the price of clothing and shoes also had an impact on the headline.

Those declines could not be offset by prices rising 0.4% on food and 0.6% on alcohol and tobacco products. Prices of education and in the healthcare sector increased 0.8% and 1.2%, respectively.
 
“The data from GUS show Poland will move towards the end of deflation more slowly than previously expected. Nonetheless, CPI will be growing, partially due to growing prices of fuels on international markets,” Bank Millennium notes.

“The data do not change our scenario for interest rates," the analysts continue. "The MPC is aware of the demand nature of deflation and it is supporting the economy. Growth perspectives remain fairly optimistic, helped by easing of fiscal policy. In our opinion, the MPC will retain interest rates at their current level in the coming months."

BZ WBK is of a simlar persuasion. “CPI will remain below zero until the end of the third quarter, but this may not be long enough to make the MPC cut interest rates,” it forecasts.

Poland’s central bank NBP recently acknowledged deflation will persist for most of 2017. The central bank now forecasts consumer inflation will come in between -0.9% and 0.2% this year, a major change from the previous forecast of 0.4%-1.8%.