Polish CPI grew 11.5% y/y in June (chart), the lowest reading since April last year, data from Poland’s statistical office GUS showed on July 14.

The reading, which came in line with the flash estimate published by GUS in late June, showed the y/y inflation eased 1.5pp in comparison to May. The CPI index remains elevated very clearly above the National Bank of Poland’s (NBP’s) target of 1.5%-3.5% but appears firmly on track to fall to single digits before the end of the year. 

“In the coming months, the CPI … will continue to decrease, although the pace of disinflation will gradually slow down,” Bank Millennium said in a comment.

Declining fuel and energy prices and a slowdown in the growth of prices for industrial production sold (PPI) are going to combine with a stronger Polish zloty, to drive the process, Bank Millennium also said.

Poland’s record low unemployment of just over 5% is likely to work against the disinflation trend through the pressure on increasing wages.

The June CPI reading also suggests a further slowdown in the core inflation growth rate, which, analysts say, eased to around 11.1% from 11.5% y/y in May.

The June inflation reading, coupled with the recent rhetoric from the NBP, points to a possible interest rate cut this autumn.

"We expect the first single-digit reading in September, which could prompt the NBP to lower interest rates in October,” Santander Bank Polska said.

“It cannot be completely ruled out that the argument for the MPC to start cutting rates could emerge as early as the September meeting," the bank also said.

Prices in the most-weighted food and non-alcoholic drinks segment drove the easing of the index in June. While expanding a considerable 17.8% y/y in June, food price growth still eased in the sixth month after a gain of 18.7% y/y in May, the breakdown of GUS data showed.

Price growth also eased in the second most-weighted segment of housing and energy, growing 14.6% y/y in June after an increase of 16.1% y/y in May.

Transport prices fell 9.7% y/y in the sixth month after decreasing 3.2% y/y in May, GUS data also showed.

In m/m terms, the CPI did not change in June, a second successive flat reading.

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