Poland's consumer price index (CPI) grew 2.9% y/y in May, easing 0.5pp versus the annual reading for April, statistics office GUS said in a flash estimate on May 29.
Inflation’s continuing to ease in May is in line with expectations. The coronavirus (COVID-19) pandemic depressed oil prices globally, which had an impact on Poland’s fuel prices, which collapsed 23.4% y/y. That drove the headline figure down although price growth in other main segments offset the decline to a degree.
Inflation is expected to keep weakening. “We expect further decline in inflation in the coming months due to weaker demand due to the current crisis. We expect inflation in December at 1.7% y/y,” Santander Bank Polska said in a comment on the GUS figures.
The deflation drivers might be held back to an extent by the weaker zloty and the expected surge in food prices because of drought.
The current CPI trend is a worry for Poland’s Monetary Policy Council (RPP), which unexpectedly cut interest rates third time since late March by 40bps to just 0.1% in late May.
Broken down by main segments, prices of food and non-alcoholic drinks expanded 6.1% y/y in May, easing from an expansion of 7.4% y/y the preceding month. Prices of energy expanded 5.2% y/y in the fifth month, the same rate as in April.
In monthly terms, CPI fell 0.2% in May. Prices of food and non-alcoholic drinks grew 0.1% m/m while prices of energy declined 0.1% on the month. Fuel prices fell 4.5 m/m.