Polish core inflation gained 0.6% y/y in March, the National Bank of Poland (NBP) announced on April 12. The reading is 0.1pp above market expectations and 0.3pp higher compared to February.
 
Core inflation has come into focus across the region, as central banks insist that the recent surge in headline inflation is driven by external factors and the low base in 2016. The headline CPI reading dropped to 2% in March, suggesting the recent inflation surge is weakening, and supporting doves at the National Bank of Poland.

However, core inflation – which strips out erratic items such as food and energy – has now accelerated for the third month in a row. The March reading was the highest since January 2015.

That hints CPI growth is being more and more driven by domestic demand, and could prove more sustainable than the monetary policy council insists. That could support the re-emergence of some less dovish voices during the next meeting of policy makers on May 16-17.

The latest projections from the National Bank of Poland (NBP) are for CPI to grow 1.6%-2.5% in 2017. The previous projection was for growth of 0.5%-2%. In 2018, CPI growth is expected at 0.9%-2.9%, compared to 0.3%-2.6% forecast previously.

GDP is expected to expand 3.4%-4% this year, compared to 2.6%-4.5% forecast previously. In 2018, the economy is predicted to grow 2.4%-4.5%, while the previous projections put it at 2.2%-4.4%.