Polish CPI dropped 0.9% y/y in March, deepening 0.1pp on the reading from the previous month, statistics office GUS announced in a flash estimate on March 31. However, the continuing downwards spiral is thought unlikely to prompt a cut in interest rates.
The reading shows the deflation trend continues to grow regardless of hopes for a reduction. Consensus had predicted CPI would come in at -0.8%. In monthly terms, consumer prices expanded minimally, at 0.1%, GUS noted.
The flash estimate did not provide a breakdown of inflation drivers, but commodity prices are clearly still in pole position. With the main driver of deflation outside the control of the Monetary Policy Council (MPC), analysts predict rate setters remain unlikely to execute a rate cut as long as economic growth remains unthreatened, BGK Bank notes.
The central bank recently changed its inflation outlook for the medium term. This year’s CPI forecast was revised 0.3pp lower to -0.8% because of a deeper-than-expected decline in food prices. Inflation for 2016 was revised upwards by 0.6pp to 1.5%, while the 2017 outlook rose 0.4pp to 1.6% with estimates on food and energy prices hiked.