Poland's consumer price index (CPI) grew 2% y/y in April, the same rate as in March, statistics office GUS announced in a flash estimate on April 28.
With interest rates at 1.5%, the April inflation figure is set to keep real interest rates in negative territory. However, given the stabilisation of inflation following the surge around the turn of the year, that is unlikely to spur the Monetary Policy Board (MPC) into action.
The CPI dynamics indicate rate setters were correct in predicting prices will not close in on the National Bank of Poland's (NBP) inflation target of 2.5%. In effect, any hawkish discussion in the MMPC is likely to ease.
In monthly terms, CPI gained 0.3%. The estimate does not contain a breakdown of inflation drivers. Full information on CPI in April will be released on May 12.
The slowing tempo of inflation is in line with rate setters’ opinion that the rise in inflation that kicked off in December is a temporary phenomenon caused by external factors, oil prices and the low base from 2016 in particular.
The MPC continues to suggest it does not expect to institute a hike in rates before 2018. The council also appears convinced that economic growth will return to form by the second quarter, as investment picks up. That view was supported by very good data on retail sales and industrial production in March, as well as rising consumer and business sentiment in April.
Poland’s GDP expanded 2.7% in 2016 on the back of the weakest investment since 2010. The result was below the government’s outlook of 3%-3.2%, which was anyway a reduction on earlier predictions for an economic expansion of 3.8%.