Polish inflation unlikely to rebound in medium-term; NBP seen hiking rates before 2016-end

Poland’s consumer price index data for June has confirmed that the country continues to see almost 1 percent deflation. Poland’s consumer price index inflation (CPI) was down 0.8 percent on a year-on-year basis. However, CPI rose 0.2 percent on a sequential basis due to a recovery seen in energy priced and food prices on the month.

Other components also recorded firmer results. For instance, package holidays registered a rise in price, likely due to a weaker zloty.

Poland’s core inflation is likely to be just a tad negative at -0.2 percent year-on-year in June, noted Commerzbank. Keeping the slight rise in June aside, no strong drivers are seen to drive inflation around in the medium-term.

Therefore, the Polish central bank, National Bank of Poland, is likely to lower rates further before the end of this year. The rate reductions are expected to be set off by the broadening differentials between euro zone yields and Poland’s benchmark rate, according to Commerzbank.