Weekly

After a few weeks of focus on banks’ stability, fears of an escalation of the banking crisis seem to have dimmed (helped, among other things, by weekly data from the US banking sector, which do not indicate a spillover of dangerous trends). This allows investors to interested once again on topics related to economic growth and inflation. The preliminary Polish CPI data published today again surprised on the upside and shows that although the annual inflation rate has started to decline (16.2% in March), this is mainly due to statistical effects, while the price momentum remains very high and is increasingly concentrated in the core inflation component. The surprising persistence of core inflation can also be seen in other countries, including the euro area. (...)

Flash CPI reading for March will be released on Friday. The good news is that the inflation rate has to fall in y/y terms relative to February - in our view it will drop to c.15.8% (the median according to the Bloomberg is 16.2%) - and the bad news is that this will happen essentially for purely statistical reasons. This is why, in assessing the inflation persistence, it is still better to analyse m/m than y/y price changes. In our view, March will bring hardly any improvement in this regard (we forecast 1.1% m/m in March after 2.5% in January and 1.2% in February), which will be one of the highest March readings of the last 20 years, indicating strong price momentum. If this process does not decelerate quickly, already in May the cumulative year-to-date price growth will exceed 6%, which will derail the chances of reaching the year-end CPI inflation level announced by the NBP President (6-7% y/y). Preliminary estimates of March inflation will also be shown by Germany and the euro area