CPI May Print Below +7.0% Y/Y; Some See Limited Room For Further Quick Disinflation

Poland will report flash readings of CPI for October at 09:00GMT/10:00CET. This month may have brought another sharp decline in headline inflation. The median estimate in the Bloomberg survey is +6.6% Y/Y, which would be broadly consistent with the forecast provided by NBP Governor Adam Glapinski during his latest press conference ("below seven percent"). Separately, Deputy Finance Minister Artur Sobon said that October inflation could be "around +7.0% Y/Y". Otherwise, sell-side analysts seem to be getting behind the idea that continued disinflation at the recent pace may be difficult to sustain.

• Alior Bank expect inflation to print at +6.6% Y/Y versus +8.2% prior, in line with consensus.
• BOS Bank see October inflation at +6.6% Y/Y, which could encourage the MPC to deliver another 25bp rate cut the following week.
  
• Citi Handlowy write that headline inflation may have eased to +6.6% Y/Y. Their calculations imply a 2% M/M drop in fuel prices and they expect post-election normalisation to affect prices at petrol stations only in November. They see core inflation at +7.9% Y/Y. They expect the disinflationary trend to slow in the coming months, with headline inflation staying at +6%-7% Y/Y through end-2024.
  
• Credit Agricole expect inflation to drop to +6.2% Y/Y, weighed on by food, fuel and energy, as well as falling core inflation. They stress that their forecast is significantly below consensus (+6.6%) and its realisation could be slightly negative for the PLN.
  
• ING estimate October inflation at +7.0% Y/Y. They expect food prices to resume growth after four consecutive months of decline, albeit it should be considerably slower rate than a year ago, which will translate into a further decline in food price inflation. They expect core inflation to ease to +8.0% Y/Y from +8.4%.
• mBank expect another notable drop in annual inflation rate, to +6.7% Y/Y from +8.2%.
• Millennium Bank see October inflation at +6.6% Y/Y, the lowest level since September 2021. They write that disinflation has been broad-based, but there is limited room for its continuation through end-2023 and 2024. They warn that inflation may accelerate towards the year-end amid an expected rebound in petrol prices.
  
• Pekao have pencilled in +6.4% Y/Y for the October inflation reading, citing strong base effects coupled with weak current inflationary pressure. They expect the sequential reading of headline inflation to be around 0% M/M amid close to no M/M change in food prices and declines in fuel and energy prices.
  
• PKO write that inflation likely cooled to a level below +7.0% Y/Y in October (they do not provide a point estimate in their daily note).
  
• Santander see inflation at +6.5% Y/Y, a sharp drop from September's +8.2%. They believe that inflation will remain in that territory through the end of this year.