Sharp Drop In CPI Expected Due To Pre-Election Measures

Flash readings are expected to show that Poland's CPI eased to +8.5% Y/Y in September from +10.1% prior, finally reaching single-digit territory. Sell-side analysts have been flagging that the latest outturn will be affected by a suite of pre-election measures (described by mBank as "inflation engineering") which include retroactive electricity price cuts, free prescriptions for selected age groups, as well as the anomalous decline in petrol prices due to the actions of state-owned retailer Orlen. The data will be released at 09:00BST/10:00CEST on Friday.

• Goldman Sachs expect headline inflation to decline to +8.5%, driven by base effects in core and food as well as a decline in fuel prices. They note that "high-frequency data suggest that Polish petrol prices declined 7% in the first two weeks of September despite a 26% increase in oil prices since early July and a weaker zloty". Goldman point to reports of political motivation behind the decline in petrol prices and hence expect it to be short-lived.
• Santander note that the next inflation reading will not be as explosive as the one for August, when everyone was wondering whether it would be in single digits (which proved inconsequential for the subsequent NBP decision). They expect September CPI inflation to print at +8.7% Y/Y, which in their view should be sufficient to justify a 25bp rate cut in October.
• Citi Handlowy expect inflation to print at +8.1% Y/Y, significantly below consensus. They are pointing to strong base effects, a sharp drop in petroleum prices, as well as lower electricity prices, with recent government measures reducing CPI inflation by around 0.3pp.
• ING see inflation falling significantly to +8.6% Y/Y in September, thanks to continued M/M declines in food prices, the government's latest measures on electricity prices and the actions of the dominant player in the petrol market.
• PKO have pencilled in +8.5% Y/Y for September CPI. They note that the expected decline in inflation was one of the reasons behind the outsized rate reduction earlier this month and can open the door to further, albeit more moderate cuts.