The recent stream of data confirmed that disinflation continues, not only on consumer’s side (about which we learned two weeks ago) but also in terms of producer prices. Deceleration of prices is proceeding in environment of stabilization of labor market (bottoming out in terms of annual growth) and falling industrial output. Along with inflation projection which will be probably tailored in such a way that a final cut would be enough to bring inflation to target in mid-term perspective, the data provide a good support for a rate cut in July and it is set to be the final one in this cycle. We think that recent FX intervention and Fed (conditional) announcement of QE tapering are not an obstacle for the cut.
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