Poland's CPI Provides Another Downside Surprise

Poland's CPI inflation eased to +11.5% Y/Y in June from +13.0% prior, printing below Bloomberg consensus forecast of +11.8% and PAP median estimate of +11.7%. Headline inflation unexpectedly remained flat on a sequential basis, even as economists in Bloomberg and PAP surveys pencilled in an acceleration to 0.2% M/M.

• mBank commented that food, energy and fuel prices fell M/M, while there was a big downside surprise in core inflation, which may have eased to +11.1% Y/Y from +11.5%. Final readings will reveal if these declines are broad-based or limited to a single category, but preliminary signals are disinflationary.
• Pekao observe that inflation again surprised consensus to the downside, with CPI unchanged M/M for the second consecutive month. They note that food prices fell for the first time in two years (except during the implementation of the government's "anti-inflation shield"). Core inflation likely fell markedly to around +11.1% Y/Y.
  
• PKO also tip hat to the second consecutive flat reading for monthly CPI change. They note that all main categories of the CPI basket worked towards disinflation. They expect core inflation to be around +11.0% Y/Y versus +11.5% in May.
  
• ING estimate that if the current trend continues, we will see headline inflation at +9.8% Y/Y in August. In this scenario, they expect the MPC to lower interest rates already in September, although they would not be supportive of such a decision.
  
• The Polish Economic Institute say that core inflation may have eased to +10.7% Y/Y from +11.5%, but they warn that the coming months may bring a slower cooling in price pressures. They expect inflation to be above +11% in July and August. They believe that decline under +10% may only come in October and may be temporary, due to the expiry of VAT exemption for food items and energy price freezes in 1Q2024.
  
• Final June CPI data will cross the wires on July 14, with official core CPI readings due on July 17.