Poland's consumer price index dropped 0.8% y/y in August, easing 0.1pp on the official reading from the previous month, statistics office GUS announced in a flash estimate on August 31.

Despite the continued fall of prices, which has persisted since July 2014, rate setters have reiterated many times in recent months that deflation is unlikely to prompt a cut in interest rates, as long as the economy is doing well. While growth in 2016 is considered unlikely to meet the government’s forecast of 3.4%, the more likely 3.2% expansion is still considered robust.

That said, the chronic fall in investment and disappointing growth seen so far this year could add renewed pressure for some loosening, according to some. "Overall, the behaviour of fixed investment and decelerating trend in PMI and industrial output also support our sub-consensus growth forecast of 3.1% for this year, and our call that rates will be lowered by 50 bps before the end of the year," writes Commerzbank.

The flash CPI reading once more defied earlier expectations that deflation may have finally passed its trough. The price drop has been alternating between -0.8% and -0.9% since May. Consensus predicted consumer prices would fall 0.9%. Analyst have consistently missed with calls for the end of deflation over the past year or more, but some remain bullish enough to predict that the CPI could start to gain some traction in September.

In monthly terms, consumer prices fell 0.2% in July, easing on June’s fall of 0.2%, GUS noted. The flash estimate did not provide a breakdown of inflation drivers, but commodity prices are likely in pole position.

Rate setters have maintained for months that the main drivers of deflation are external, and therefore CPI is unlikely to be sensitive to monetary policy. On top of their stated priority for economic growth over inflation targeting, as well as concern over financial stability in an already low-interest rate environment, that has helped the MPC shrug off pressure for easing thus far.