Polish CPI expanded 4.6% y/y in March, the annual growth rate easing 0.1pp versus February, the statistical office GUS said in a preliminary estimate on April 15. 

The slowdown in price growth is thus mild and any deflationary impact of the coronavirus (COVID-19) epidemic will only be clear when the April CPI reading is published next month. 

Fearing inflation could descend below the lower band of the deviation from the 2.5% target, however, Poland’s Monetary Policy Council carried out unprecedented easing in the past weeks, lowering interest rates twice to a new record low of just 0.5%.

Broken down by key segments, prices grew 8% y/y in the most-weighted segment of food and non-alcoholic drinks in March, easing 0.5pp versus February.

Prices in the second most-weighted segment, housing, increased 7.5% y/y in March, adding 0.2pp versus the preceding month. Prices of tobacco and alcohol products expanded 4.3% y/y, adding 0.2pp as well.

CPI growth was impeded to an extent by prices falling 1.4% y/y in the transport segment (after falling 1.4% y/y in February). A dip of 1.7% y/y (-1% y/y in February) in the shoes and clothing segment also held back the headline figure.

In monthly terms, CPI expanded 0.2% in March after growing 0.7% m/m the preceding month.

“The disinflationary impact of the pandemic is likely to be visible in April data,” ING said.

“In the coming months, we expect CPI to slow down further. Fuel prices should take away another 0.5pp-0.6pp from the headline figure. Core prices are a significant risk, depending on the GUS approach to goods and services effectively not currently being traded. If their estimates include very weak demand, CPI could decline substantially in 2Q,” ING added.