Core inflation in Poland is falling, despite the rise in consumer inflation. At the same time, signals are surfacing that interest rate cuts in our country are imminent. Inflation in the European Union returns to the 2% level.
Core Inflation in Poland is Falling
Data was published yesterday concerning Poland’s core inflation, which dropped from 4.3% in September to 4.1% in October. This inflation index is characterised by excluding the most variable prices: energy and food. Many experts believe that this shows longer-term trends. Therefore, it is a measure used. On the other hand, it is a fairly abstract indicator since we all consume these two categories. Attention should be drawn to the fact that energy prices were responsible for the last rise in consumer prices. We end up in a situation where one indicator driven by energy price rises is increasing, while one without them is dropping. This is good reading for our wallets, but it doesn’t bring us closer to interest rate cuts.
What’s Next for Interest Rates in Poland?
If inflation is not under control, what could suggest falling interest rates? It is worth looking at two additional elements: the market rates in Poland, i.e. WIBOR, and bonds. In both cases, signals have recently been seen suggesting that the market is beginning to predict declines in interest rates. Since the beginning of November, the yield of Polish bonds has fallen by 0.3% from the highest levels in a year, which is quite a significant change in this market. Similar downward movements are also seen in the WIBOR rate, especially in the longer ones, such as 6 and 12-month ones. For this very reason, one should not expect the first rate cuts much faster than in six months.
Inflation in the European Union
Today we also learned about the consumer price inflation rate for the European Union. As expected, prices rose by 2% in October. This is 0.3% faster than in September. This is not a level that currently causes doubt, but a rebound in prices could slow the pace of interest rate cuts. If such a slowdown occurs, it could strengthen the euro, as well as other signals indicating that interest rates will be higher than expected. Such actions could counterbalance recent strengthening of the dollar, which resulted from Donald Trump’s presidential election victory.
Today in the macroeconomic data calendar, attention should be paid to:
- 14:00 – Hungary – decision on interest rates,
- 14:30 – USA – housing starts,
- 14:30 – USA – building permits.
Maciej Przygórzewski – Chief Analyst at InternetowyKantor.pl
Source: https://managerplus.pl/inflacja-bazowa-w-polsce-spada-ale-konsumencka-rosnie-co-dalej-ze-stopami-procentowymi-w-polsce-40205
