Polish deflation shows further signs of fading in June

Polish deflation shows further signs of fading in June
By bne IntelliNews June 30, 2016

Poland's CPI dropped 0.8% y/y in June, easing no more than 0.1pp on the official reading from the previous month, statistics office GUS announced in a flash estimate on June 30.

As has been confirmed by rate setters many times in recent months, however, the long deflation run - in place since July 2014 - is unlikely to prompt a cut in interest rates, as long as the economy is doing well. Meanwhile, the flash reading will likely strengthen cautious predictions that deflation may have finally passed its trough.

Consensus had predicted consumer prices would fall 0.9%. The index's fall of 0.9% y/y in May had provoked some hope that a recovery of inflationary pressure may have started; the CPI dropped 1.1% in April. In monthly terms, consumer prices expanded 0.2% in June, faster than May’s hike of 0.1%, GUS noted.

The flash estimate did not provide a breakdown of inflation drivers, but commodity prices are clearly still in pole position. Rate setters have maintained for months that the main drivers of deflation are external, and therefore CPI is unlikely to be sensitive to monetary policy.

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