Poland's September inflation data raises chance of rate cut

Poland's flash CPI estimate for September confirmed the expectation that inflation would take a fresh turn lower, driven by the lower commodity and energy prices. CPI de-clined by 0.8% y/y in September, weaker than consensus expectation of -0.6%, and this broke the trend of narrower deflation in recent months. 

It is already known that fuel prices would dampen CPI by 0.9pp in September vs. 0.7pp in August, and now high probability is seen that core inflation also fell further in September from already near-zero (0.4%) in August, core CPI data is due on 16 October. 

"If such a downturn were to be con-firmed in coming months, this will significantly increase the likelihood of fresh rate cuts early next year, which would in turn mean upside risk to our EUR-PLN forecast of 4.15 for end-2016", says Commerzbank.