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Polish Industry Quickens, Suggesting Rates May Keep Rising

June 17 (Bloomberg) -- Polish industrial growth accelerated in May, increasing chances the central bank will continue raising interest rates.

Industrial production expanded 7.7 percent in May from a year earlier after growing 6.6 percent in April, the Central Statistical Office in Warsaw said today. The median estimate of 26 economists surveyed by Bloomberg was 7.6 percent. Output rose 2.6 percent on the month.

The Narodowy Bank Polski raised its benchmark seven-day rate by a quarter-point to 4.5 percent on June 8, the fourth increase this year, to curb inflation that has remained above the bank’s 2.5 percent target since October. Governor Marek Belka said after the decision that the bank will pause its monetary tightening to gauge the effect of its moves and repeated that prediction in a radio interview today.

"They’ll raise" interest rates "again some time in the autumn and perhaps next year as well," Maciej Reluga, chief economist at Bank Zachodni WBK in Warsaw, said by phone. "Inflation will come down during the summer, but it will go up again towards the end of the year, and core inflation is rising, which shows there are demand side pressures."

The zloty traded at 3.9797 per euro at 5:55 p.m., 0.1 percent weaker on the day. The five-year Treasury bond extended gains and yielded 5.45 percent, compared with 5.49 percent late yesterday.

Core Inflation

Core inflation, which strips out volatile fuel and food prices, accelerated to 2.1 percent in April, the highest since February 2010. The rate may rise to around 2.4 percent in May, Reluga said.

Poland’s inflation rate rose to 5 percent in May, the highest in almost a decade, increasing speculation the central bank may continue raising rates. Policy makers around the world are battling to contain inflation spurred by food, commodity and energy costs. The European Central Bank, as well as central banks in Norway, Russia and Denmark, increased rates in the past two months in response to price pressures.

Producer prices, an early indicator of inflationary trends, rose 6.5 percent from a year earlier in May, compared with the median forecast of 7.2 percent in a Bloomberg survey of 22 economists, the statistics office reported today. Producer prices fell 0.2 percent on the month.

The central bank in February changed its forecast for this year’s economic growth to between 3.3 percent and 5.1 percent from a range of 3.3 percent to 5.5 percent. The expansion may be between 2.3 percent and 4.8 percent next year, compared with an earlier forecast of 2.8 percent to 5.5 percent, it said.

“The high tempo of industrial output in May, together with the favorable data in all the construction branches demonstrates what a good condition our economy is in,” said Polish Economy Minister Waldemar Pawlak in an e-mailed comment.

To contact the reporters on this story: Katya Andrusz at

Monika Rozlal at

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

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