Economic comment

GUS confirmed March CPI inflation at 3.0% y/y and 1.1% m/m, with goods accelerating to 2.2% y/y from 1.0% y/y and services to 5.0% y/y from 4.8% y/y. Estimates of food and fuel prices did not change vs the flash reading, at 0.0% m/m, and 15.4% m/m, respectively, while energy moved a tick higher, to 0.0% m/m from -0.1% m/m. Other categories were roughly in line with our estimates.

We are expecting the CPI inflation to oscillate around 3.0% y/y in the months to come (provided that cut in fuel taxes will remain in force until the year-end), with future development of oil prices remaining the main risk factor. We estimate March core inflation at 2.7% y/y and in our view it is likely to climb above 3.0% y/y further in the year. Such a development of inflation will make the MPC refrain from any rate changes until end of the year, in our view. 
 

Polish MPC kept interest rates on hold, with the reference rate at 3.75%. The decision was quite obvious, given a recent spike in commodity prices that pushed CPI to 3% in March and raised uncertainty about the inflation and economic outlook. Plus, several MPC members, including the ones perceived as the most dovish, clearly suggested recently they were not going to change monetary policy anytime soon.

The official post-meeting statement pointed to significant uncertainty about the global economic outlook, repeated that next decisions will be driven by the upcoming information and emphasised that the outlook heavily depends on geopolitical situation and commodity market developments. (...)

Rising fuel prices pushed inflation up to 3% y/y  in March. A slight decline is likely in April, but the size of this move will depend on the behaviour of commodity prices in the coming weeks. Given developments in the Middle East, we currently assess that even in a scenario of a relatively rapid de-escalation of the conflict, the return of commodity prices to lower levels will be gradual. As a result, the inflation path for the coming months is shifting upwards, which will most likely rule out any interest rate cuts this year.