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Polish Price Growth Slows, Weakening Case for Higher Rates

Feb. 15 (Bloomberg) -- 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 solve its debt crisis, curbing Polish growth by damping demand for the country’s exports. The zloty has strengthened 7.2 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, 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 was little changed after the data release, trading at 4.1833 per euro at 2:12 in Warsaw, down less than 0.1 percent on the day. Six-month forward-rate agreements, used to speculate on interest rate levels, traded at 4.8987 percent, down 3 basis points from yesterday.

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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