Poland's consumer price index (CPI) grew 2% y/y in March, slowing from the 2.2% annual gain in February, statistics office GUS announced on March 31.

Polish interest rates sit at 1.5% and, if confirmed, the March inflation figure would keep real interest rates in negative territory. However, as the CPI reading has dropped further below the National Bank of Poland's (NBP) inflation target of 2.5%, any hawkish discussion in the Monetary Policy Council (MPC) is likely to ease.

In monthly terms, CPI fell 0.1%. The estimate does not contain a breakdown of inflation drivers. Full information on CPI in March will be released on April 11.

The slowing tempo of inflation is in line with rate setters’ opinion that the swift rise in inflation that kicked off in December is a temporary phenomenon. The MPC insists that the CPI surge is largely the result of external factors - oil prices and the low base from 2016 in particular - and will level out shortly.

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.

Poland’s GDP expanded 2.8% 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%. Good performance from real economy sectors in early 2017 revived hopes for faster growth in 2017.