Poland's consumer price index expanded 1.9% y/y in January, shedding 0.2pp compared to the annual growth rate seen in the preceding month, statistics office GUS announced on February 15.
The slowdown in inflation will only reassure the Monetary Policy Council (MPC) that despite growing demand pressures in the economy and rising costs of labour, the inflation target of 2.5% is unlikely to be exceeded this year.
That should cement the dovish mood in the council for now. That said, the expected acceleration of growth in core inflation will contribute to a “gradual lowering of the comfort of those MPC members who have supported stable monetary policy”, Bank Millennium wrote in a comment.
“We see inflation rate stay below the target of 2.5% for most of the year and average 2.2% in 2018,” Erste wrote.
“Such development supports stability of rates scenario this year. The inflation expectations, however, will be gradually rising and if labour market tightens further, the MPC is likely to begin considering monetary tightening next year,” the Austrian bank added.
Once again, accelerating price growth in the food segment was behind CPI expansion, the January data showed.
Food became 4.1% more expensive in annual terms in January, a slowdown on the 5.8% y/y expansion in December. Housing costs grew 1.7% y/y overall, 0.4pp slower than in the preceding month. Prices in the transport segment fell 1.1% y/y, 0.3pp faster than in December.
In monthly terms, prices grew 0.3% in January, 0.1pp faster than in the month previous.
According to the latest projection, in 2018 and 2019 inflation is expected to accelerate to 1.6%-2.9% this year and at 1.7%-3.7% in 2019. CPI growth came in at 2% in 2017, the fastest growth since 2012. CPI fell 0.6% in 2016.