Poland deflation to narrow?

Poland headline CPI fell by an expected 0.8% y/y vs. 0.9% y/y in June. Food and beverage prices rose more than expected, and fuel prices turned less deflationary, both of which exerted upward pressure on the headline. Latest data show that deflation in Poland is narrowing. 

Interestingly, the breakdown suggests that core inflation likely moderated from 0.4% y/y to 0.2% y/y. If this is confirmed by today's data, it will be a rather dovish development, given the contrasting regional trend of upward inflation surprises. 

"That said, this core inflation will likely stabilise in coming months and begin to inch higher. At this point in the cycle, a 0.2% reading might not trigger any monetary policy response, hence this should be PLN neutral", says Commerzbank.