Bloomberg News

Polish Inflation Accelerates for Third Month on Weaker Zloty

December 14, 2011

(Updates with economist’s comments in fourth paragraph, forward-rate agreements in fifth, central banker in sixth.)

Dec. 13 (Bloomberg) -- Polish inflation quickened to a six- month high in November on a weaker zloty, leaving little room for policy makers to ease borrowing costs even as the economy slows because of the euro region’s debt crisis.

Consumer prices rose 4.8 percent from a year earlier after a 4.3 percent increase in October, the Warsaw-based Central Statistical Office said today. The median estimate of 30 economists in a Bloomberg survey was 4.5 percent. Prices rose 0.7 percent from the previous month.

Inflation has remained above the central bank’s 2.5 percent target since September last year even after the bank raised the benchmark seven-day rate by a combined 1 percentage point in the first half of 2011. The Monetary Policy Council left the rate unchanged last week for a sixth month, saying a weak zloty is the biggest inflation risk.

“Looking at today’s data, it will be hard to get inflation down to the target rate over the next year,” Grzegorz Maliszewski, chief economist at Bank Millennium SA, said by phone after the release. “The central bank is going to be very cautious in changing its policy now - we can expect rates to stay unchanged for a good while.”

Investors pared their expectations for interest rate cuts in Poland following the data. Two-year interest rate swaps rose 3 basis points to 4.85 percent. Twelve-month forward rate agreements that investors use to fix borrowing costs in the future rose six basis points to 4.65 percent to stand 33 basis points below the three-month Warsaw Interbank Offered Rate.

No Chance

There is no chance for the Polish central bank to cut interest rates in the first half of next year and increases in domestic borrowing costs are more likely than cuts, Anna Zielinska-Glebocka of the Monetary Policy Council was quoted as saying by PAP newswire after the data release.

The zloty tumbled 13 percent against the euro in the past six months, the biggest drop among currencies tracked by Bloomberg. Poland sells 54 percent of its exports to the euro area and western banks own 59 percent of its bank assets.

The Polish currency was little changed after the data, trading at 4.5559 per euro at 2:24 p.m. in Warsaw, up 0.1 percent on the day.

Economic slowdown in the euro region and a weaker zloty offset each other as far as the impact on inflation goes, keeping “the chances for rate moves either way” unchanged since the meeting last month, central bank Governor Marek Belka said Dec. 7.

--With assistance from Barbara Sladkowska, Katya Andrusz and Piotr Skolimowski in Warsaw. Editors: Alan Crosby, Andrew Langley, David McQuaid

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

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

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