CPI ex-food/fuel/energy, the NBP’s main core inflation indicator, came in at -0.2% y/y in March, the NBP said Tues. Our expectation was for core inflation of -0.1% y/y in March, so it was slightly deeper than expected. The -0.2% y/y core inflation print came as CPI deflation ticked up to 0.9% y/y in March from 0.8% the month before. The second most important core inflation indicator tracked by the NBP is the 15% trimmed mean indicator, which fell 0.5% y/y, the same as the previous month. The core inflation indicator stripping out regulated prices fell 1.0% y/y, wider than the 0.9% fall seen the month before. That taking out the most volatile prices fell 0.3% in March, versus a 0.4% decline in February.
Overall, ongoing negative core underscores the lack of cost pressures in the economy. Core inflation is expected to march back into positive territory, though, and close the year at a still low 0.5%, up from 0.3% in 2015, according to the NBP’s latest projection. Core inflation will then rise to 1.3% in 2017 and 1.8% in 2018. This lack of inflation pressure is, however, due largely to external supply factors. It is also being accompanied by above-potential economic activity that is expected to close the negative output gap by early 2017. As such, the Monetary Policy Council does not seem likely to respond to low core inflation, and low inflationary pressures in general, with further policy accommodation, though some of the doves have begun chirping.
|Core inflation (%)|