NBP: Core Inflation Miss Plays Into Evaluations Of NBP Rhetoric 1/2

The release of softer-than-expected core CPI (headline ex-food and energy) yesterday put hawkish guidance from NBP Governor Glapinski to a test at a time when it is facing renewed scrutiny, even as the reading missed the consensus forecast by just 0.1pp. The most commonly watched gauge of core inflation fell to +3.6% Y/Y, the lowest level in three years.

• This came as the market expected a slowdown to +3.7% from +3.8% prior. It should be noted that estimates are typically based off breakdown data from the final CPI report released the day earlier, which is why the forecast range is rather narrow. This may amplify the sense of surprise provided by even small deviations from the consensus call.
• PKO drew attention to the fact that the "annualised geometric mean of core inflation momentum for the past 3 and 6 months translates into a core inflation slightly above the tolerance band around the NBP's inflation target, which points to the normalisation of underlying inflationary dynamics."
• On the other hand, a number of desks noted that the other three measures of underlying inflation all increased in June. CPI ex-administered prices printed at +2.5% Y/Y (vs. +2.4% prior), CPI ex-most volatile prices was at +3.3% Y/Y (vs. +3.1% prior), while the 15% trimmed mean was at +3.1% Y/Y (vs. +3.0% prior).
• Incoming data will be closely monitored, with market participants having plenty of time to reassess NBP rhetoric during the unusual two-month hiatus in between the July and September monetary policy decisions (the August meeting is a non-decision one), with particular focus on Governor Glapinski's hawkish guidance towards stable rates until 2026.