CPI ex-food/fuel/energy, the NBP’s main core inflation indicator, accelerated to 0.6% y/y in March from 0.3% in February, the NBP said Wed. That is the highest level since January 2015 and is 0.1pp above our forecast based on the CPI data. The acceleration to 0.6% y/y came despite the fact CPI inflation slowed 0.2pp to 2.0% y/y in March.
The second most important core inflation indicator tracked by the NBP is the 15% trimmed mean indicator, which rose 1.4% y/y, up from 1.3% in February. That is the biggest rise since February 2013. The core inflation indicator stripping out administered prices rose 2.2% y/y, down from 2.4% the month before.
Overall, core inflation has heated up from negative levels only recently, and March did surprise to the upside, if only just. However, despite the uptick, core inflation remains very low and signals rather the continuation of a lack of cost pressures. As such, the Monetary Policy Council will not be worried about underlying inflation pressure and will read low headline and core inflation as allowing it to hold interest rates as long as the economy does not throw up any surprises.