Polish Prices Slowed Last Month, Weakening Case for Higher Interest Rates

Poland’s inflation rate fell for a second month in January, reaching its lowest level since July 2011 as a stronger zloty cut the price of imported goods and reducing the probability of a central bank rate increase.

Consumer prices grew 4.1 percent from a year earlier after rising 4.6 percent in December, the Central Statistics Office in Warsaw said today. The median estimate of 28 economists in a Bloomberg survey was for an increase of 4.3 percent. Prices rose 0.7 percent from the previous month.

Inflation in the European Union’s biggest eastern economy is slowing as the euro area struggles to resolve its debt crisis, curbing Polish growth by damping demand for the country’s exports. The zloty has strengthened 6.3 percent against the euro this year.

“Slower inflation was to a great extent due to the stronger zloty, which brought down the price of imported goods,” Piotr Bielski, an economist at Bank Zachodni WBK in Warsaw, said by phone after the release. “Today’s data mean there’s no justification for the central bank to be hiking rates -- and if economic growth slows, as expected, we’re likely to see rate cuts in the second half.”

The zloty traded at 4.1963 per euro at 5:12 p.m. in Warsaw, down from 4.1828 before the release. Six-month forward-rate agreements, used to speculate on interest rates, traded at 4.88 percent, down 5 basis points from yesterday.

The inflation rate may rise to 4.2 percent or 4.3 percent this month from 4.1 percent in January, the Economy Ministry said today in an e-mailed statement. Monthly consumer-price growth may slow to 0.3 percent in February from 0.7 percent in January as food-price increases subside and fuel costs stabilize because of the stronger zloty, the ministry said.

To contact the reporters on this story: Katya Andrusz at kandrusz@bloomberg.net

Dorota Bartyzel at dbartyzel@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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