Polish Inflation Slowed in November, Paving Way for Cuts

Polish inflation slowed for a second month to the weakest pace in two years in November, paving the way for more interest-rate cuts to boost growth in the European Union’s largest eastern economy.

The inflation rate rose an annual 2.8 percent, compared with 3.4 percent the previous month, the Central Statistical Office in Warsaw said today. That was below the 2.9 percent median forecast in a Bloomberg survey of 32 economists. Prices rose 0.1 percent on the month.

With more than half its exports sent to the recession-hit euro area, Poland must revive demand at home to boost growth that slowed to the weakest pace in more than three years in the third quarter. The central bank predicts the expansion will ease to 1.5 percent in 2013, the least in a decade, while the inflation rate will drop below the bank’s 2.5 percent target.

Price growth “has entered a fast-drop phase and may fall to the lower end of the central bank’s tolerance range by mid-2013,” Tomasz Kaczor, chief economist at Bank Gospodarstwa Krajowego in Warsaw, said by e-mail before today’s report. “We expect a rate cut in January, a short pause in the easing in February and a new wave of cuts revived in March.”

The zloty stayed weaker against the euro after today’s report, trading at 4.0942 per euro at 2:12 p.m. in Warsaw, down more than 0.1 percent on the day. The yield on the government’s 10-year bond was unchanged at 3.869 percent.

The central bank cut rates last week for a second month, saying the easing cycle will continue. The bank is the only one in the EU to raise borrowing costs this year, with inflation exceeding the target since October 2010. Its consumer-price tolerance range is between 1.5 percent to 3.5 percent.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

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

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