Polish core inflation remained at 0.6% y/y in July, the National Bank of Poland (NBP) said on August 16.
The reading is in line with the consensus and provides a further rationale for Poland’s Monetary Policy Council not to change its current dovish outlook on monetary policy. The MPC currently maintains that it is most likely to keep rates on hold at their current record-low level of 1.5% until the end of 2019.
A change in the rates could only take place if there is a sudden deterioration of the political or economic situation in Poland or abroad, the rate-setting body insists. With GDP growth at 5% y/y and inflation in check despite steadily growing wages, however, there is nothing that clouds the horizon in the short to mid-term at least.
Polish CPI grew 2% y/y in July, the statistical office GUS reported on August 14, a second consecutive month in which price growth hit the 2% mark. July, however, was also the first month in which inflation did not accelerate after April-June saw prices climb from the 18-month low of 1.3% y/y in March.
Analysts expect inflation to moderate now to below 2% y/y. According to the latest CPI projection from the NBP, there is a 50% probability that inflation will remain within 1.5%–2.1% in 2018, compared to the March outlook of 1.6%–2.5%.
The central bank’s inflation target is 2.5%, but that level has been reached only once since deflation ended in December 2016.
The NBP forecast also puts price growth at 1.9%-3.5% in 2019 (1.7%–3.6% in March) and at 1.7%–3.9% (1.9%–4.1%) in 2020.