Poland's consumer price index expanded 2.1% y/y in December, shedding 0.4pp compared to the annual growth rate seen the previous month, statistics office GUS announced on January 15. 

The data is a rare revision – by 0.1pp upward - of a flash estimate of annual CPI change in December that GUS released in early January. Once again, accelerating price growth in the food segment was behind CPI expansion, the data showed. In monthly terms, prices grew 0.2% in December, 0.3pp slower than in the month previous.

The slowdown in the inflation rate is set to keep the Polish rate setters in the current dovish mood, even if for the time being only, Bank Millennium notes.

“December data temporarily increase the comfort of the Monetary Policy Council (MPC), but in our view, inflation will return to accelerating growth this year,” the bank said in a comment to the inflation reading.

That, the Portuguese-owned bank claims, will give the hawks in the MPC a new momentum. “This will lead, in our opinion, to a rate hike in the second half of 2018, most likely during the November meeting, when the projection of GDP and inflation of the National Bank of Poland will be presented,” the bank wrote.
 
But others are less convinced about the hike scenario. “We expect to see gradually increasing demand pressure that should be reflected in rising core inflation as nominal wage has been accelerating,” Erste wrote.

“The MPC, however, is likely to sustain dovish bias as development is in line with the MPC's expectations. This year we see inflation rate to be 2.2% on average and see a rate hike in the fourth quarter only if inflation rate overshooting the target becomes increasingly likely,” the Austrian bank added.

Food became 5.8% more expensive in annual terms in December. Housing costs grew 2.1% y/y overall – including growth of 2.6% y/y in energy costs - while prices in the restaurant and hotels segment increased 2.8% y/y. Prices in the transport segment fell 0.8% y/y. That included a 1.3% y/y reduction in the price of fuels.

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.