Inflation surprised on the downside as a drop in food prices exceeded expectations. Lower fuel prices also contributed to the disinflation. June’s CPI data relieves pressure on the central bank to tighten monetary policy further in the near future.
Food prices dropped 1.8% mom reflecting declining demand for vegetable after E. Coli worries and following Russian ban on European exports of vegetable goods. We could already see a similar impact on food prices in the Czech Republic as well as Hungary.
Fuel prices followed a drop of oil prices on markets (Brent fell by 6.8% in May and 3.8% in June) and declined by 0.9% mom.
While headline inflation remains elevated, core inflation (ex food & energy) remained unchanged at 2.4%, just a notch below the official central bank’s target. Domestic demand keeps growing quickly but external conditions may worsen in the second half of the year. Thus, NBP may decide to pause rate hiking not to hurt GDP growth.
Actual (Jun): -0.4% mom; 4.2% yoy
Consensus: 0.1% mom; 4.8% yoy
Previous (May): 0.6% mom; 5.0% yoy