Poland’s inflation rate remains negative in May; marginal rise likely in H2 2016

According to the flash estimate, Poland’s headline consumer price index was up 0.1% month-on-month in May, as compared with April’s print of 0.3%. The headline CPI was slower than expectations. On an annual basis, inflation was -1%, as compared with the projection range of -0.9% to -0.8%. Given the flash estimate of the headline CPI, core inflation is likely to be around -0.5% y/y in May, as compared with -0.4% y/y recorded in April, said Commerzbank in a research report.

This affirms the absence of inflationary pressure in CEE, even where the labor market is rebounding and growth is stable. The moderate recovery in commodity and oil prices recently might result in a period of marginal rise in inflation in the second half of 2016. However, the models imply that the rise will be slower than the forecast of most of the CEE central banks, noted Commerzbank.

This will further result in lowering the projections before the end of 2016, where the 2017 forecasts are also likely to be lowered. These trends keep an open door for reduction in interest rates, although the NBP governor Adam Glapinski’s comments imply that the central bank is unlikely to lower rates in the coming few months.