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Polish Inflation Slows to Below Central Bank Upper Limit

November 14, 2012

Polish consumer-price growth slowed to below the upper end of the central bank’s tolerance range for the first time in almost two years, boosting expectations for interest-rate cuts.

The annual inflation rate fell to 3.4 percent, compared with 3.8 percent in September, the statistical office in Warsaw said today. That was under the 3.5 percent upper end of the bank’s tolerance range for the first time since December 2010, and matched the median estimate of 33 economists in a Bloomberg survey. Prices rose 0.4 percent from the previous month.

As the euro region’s crisis drags on, inflation in the European Union’s biggest eastern economy may decelerate to 2.5 percent by mid-2013, according to the Narodowy Bank Polski, meeting the central bank’s target for the first time since September 2010. Slowing price growth may boost investors’ expectations for more monetary easing after the central bank cut the benchmark rate last week for the first time since 2009.

“We’ve gotten back to a level monetary policy makers can accept,” Jaroslaw Janecki, chief economist at Societe Generale in Warsaw, said in an interview on TVN CNBC. “There’s a big chance we will see the 2.5 percent inflation target reached in the early months of next year.”

Easing Expansion

The zloty weakened to 4.1773 per euro at 2:11 p.m. in Warsaw, paring its gain to 0.2 percent on the day. The average yield on the government’s two-year Treasury bond dropped 3 basis points after the data to 3.64 percent.

Poland’s expansion may ease to 1.5 percent next year, the least since 2002, with inflation slowing to 1.5 percent in two years, the lowest rate since 2007 and the bottom of the bank’s tolerance range, according to central bank new forecasts. The economy, the only one in the EU to avoid a recession in 2009, expanded 4.3 percent last year.

The central bank is poised to cut borrowing costs twice in coming months as the inflation rate heads toward a three-year low, policy maker Adam Glapinski said in an interview on Nov. 10. “Anything can happen if the slowdown triggers a radical drop in the inflation rate,” said Glapinski, indicating that the bank may consider a larger scale of monetary easing.

Deteriorating demand will push Polish inflation to 2.6 percent in 2013 from an estimated 3.8 percent this year, driven by rising administered prices, zloty depreciation and higher commodity prices, the European Commission said in its revised forecast on Nov. 7. Consumer prices will rise 2.4 percent in 2014 even as the economy experiences a “modest pick-up in economic activity,” the commission said.

The central bank should continue monetary easing without delay, policy maker Anna Zielinska-Glebocka was cited as saying in an interview published yesterday by PAP newswire. There’s room for cumulative rate cuts of as much as 1 percentage point, including 25 basis points this month, PAP quoted her as saying.

To contact the reporter on this story: Ott Ummelas in Tallinn at

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

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