Poland deflation persists, strengthens rate cut view

Poland released its flash CPI estimate for October yesterday, the headline reading came in at -0.8% yoy the same as in September, and was softer than the -0.7%yoy the market was looking for. 

This was despite certain food items experiencing sharp price rise during the month, it is likely that falling fuel prices countered rising food prices. 

It is anticipated that core inflation accelerated slightly to 0.3%yoy in October from 0.2% in September (data will be out 16 November), such acceleration would be within normal range of variation and would essentially represent a near-zero underlying inflation rate. 

"Eventually, such near-zero inflation will likely drive the incoming MPC to undertake out fresh rate cuts next year. There is likelihood seen of at least 50bps rate reduction to 1% by the end of Q1 2016. The zloty is likely to trade with a softer tone as such prospects become clear over the coming months", says Commerzbank.