CPI ex-food/fuel/energy, the NBP’s main core inflation indicator, inched down to 0.7% y/y in August from 0.8% in July, the NBP said Tues. That is in line with the consensus and our forecast. The decline came despite the fact CPI inflation ticked up to 1.8% y/y in August from 1.7% the month before. The CPI acceleration came in large part due to higher fuel prices, so that wasn’t reflected in the core move.
The second most important core inflation indicator tracked by the NBP is the 15% trimmed mean indicator, which rose 1.7% y/y, up from 1.5% in June. The core inflation indicator stripping out administered prices rose 1.9% y/y, up from 1.7% the month before, and that stripping out the most volatile prices rose 1.3%, the same as the month before.
Overall, the core inflation print will continue to tell the Monetary Policy Council that underlying inflation is not a threat. After noting in its early September sitting that core inflation remained low, the MPC said that it expected headline inflation to gradually rise due to domestic inflationary pressure stemming from improving domestic economic conditions, though a decline in import price growth would cap such moves. In this context, the risks to inflation are deemed low. That will help the MPC majority decide to keep rates flat for a long time and well into 2018.