Bloomberg News

Polish Price Growth Slows in June, Easing Rate Pressure

July 13, 2011

(Updates with central banker comment in fourth paragraph, economist in seventh, inflation expectations in sixth.)

July 13 (Bloomberg) -- Polish inflation slowed more than economists estimated in June, easing pressure on the central bank to raise interest rates for a fifth time this year.

Consumer prices rose 4.2 percent from a year earlier, compared with 5 percent in May, the fastest in almost a decade, the Central Statistical Office said in Warsaw. The rate compares with the 4.8 percent median estimate of 29 economists surveyed by Bloomberg. Prices fell 0.4 percent in a month.

The figures support the central bank’s forecast that four interest rate increases earlier this year will be enough to slow consumer-price growth to policy makers’ 2.5 percent target. The Narodowy Bank Polski last week left its benchmark interest rate at 4.5 percent, saying it wouldn’t rule out monetary tightening if prospects for meeting the goal worsen.

“It’s definitely a relief for my colleagues that we’re not under the kind of pressure now that would force the council to take sharp measures,” Halina Wasilewska-Trenkner, an adviser to central bank Governor Marek Belka, said in an interview on TVN CNBC.

Neighboring Czech Republic and Hungary both reported slower-than-expected inflation yesterday. Czech consumer prices rose 1.8 percent, against expectations of 2.1 percent, while the Hungarian inflation rate declined for a second month to 3.5 percent, the lowest rate since April 2009, compared with the 3.8 percent median estimate of 18 economists.

Inflation Expectations

The gap between yields on Poland’s five-year government bonds and inflation-linked notes, a measure of expectations for consumer-price increases, dropped to 2.92 percent today from 3.1 percent yesterday, while two-year interest-rate swaps, which investors use to lock in borrowing costs, fell to 5.01 percent.

Food-price inflation slowed to 6.4 percent from 8.8 percent in May. The rate probably fell more than expected because of the Russian ban on European vegetable exports and a general decline in demand after the E. Coli outbreak in Germany, Piotr Bujak, an economist at Bank Zachodni WBK, said by phone.

“We won’t be seeing another rate hike until October or November, if there’s one at all,” he said.

The annual inflation rate will fall close to the target in mid-2012, monetary-policy maker Elzbieta Chojna-Duch told the PAP news service today.

Yields Drop

The zloty strengthened to 4.0302 per euro at 3:28 p.m. in Warsaw from 4.0589 before the release. The yield on the five- year Treasury bond maturing April 2016 dropped 14 basis points on the day to 5.32 percent.

Crude-oil prices fell 7.2 percent in June, paring their 12- month gain to 26 percent. Energy costs may drop further after the German newspaper Die Welt said this week that the European Central Bank wants to expand assistance to Italy, heightening speculation Europe’s sovereign-debt crisis will curb economic growth and demand for commodities.

Inflation will stay at “an elevated level” in the coming months, slowing to 4 percent at the end of the year, Poland’s central bank said in a report published July 11. It predicts the inflation rate at 2.7 percent next year and 2.4 percent in 2013 as economic growth lags behind earlier predictions.

--Editors: Balazs Penz, Willy Morris

To contact the reporter on this story: Dorota Bartyzel in Warsaw at Katya Andrusz at

To contact the editor responsible for this story: Balazs Penz at

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