Inflation stabilized in April

In accordance with GUS data, CPI inflation in April has not changed compared to March and amounted to 2.0% YoY, running in line with our forecast equal to the market consensus.

Conducive to increase in inflation (+0.2 pp) was higher core inflation, which according to our estimates rose to 0.8% YoY vs. 0.6% in March. The increase in core inflation was caused mainly by higher dynamics of prices in the category "recreation and culture” (2.4% YoY in April vs. 1.1% on March). Inflation was also positively impacted (+0.1 pp) by higher dynamics of energy prices (1.4% YoY in April vs. 0.6% in March) due to new higher tariffs introduced on gas fuel.

On the other hand, conducive to lower inflation (-0.2 pp) was lower growth rate of fuel prices which dropped to 14.4% YoY in April vs. 18.1% in March. Its decrease was due to the abatement of the low base effects from the year before and to the month-on-month fall of fuel prices in April 2017 (-0.9% MoM). Inflation was also negatively impacted (-0.1 pp) by lower dynamics of food prices (2.8% YoY in April vs. 3.1% in March). Lower price dynamics were recorded i.a. in case of fruit, vegetables, fish, oils and fats, and sugar.

Frost poses an upside risk to inflation in the coming months

Today's data support our forecast, in which inflation in subsequent months will run at ca. 2.0% YoY. In H2 2017 we expect a decline in inflation caused by high base effects for food and fuel prices. Consequently, we expect that inflation will amount to 1.8% on a yearly average in the whole 2017 and thus will run below the inflation target (2.5%). An upside risk to our forecast is the frost which occurred in Poland in recent weeks. In the coming months it will be conducive to higher food prices, fruit prices in particular. However, at this stage we believe that its impact on total inflation will be limited.

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