Polish CPI Remains Too High to Cut Rates, Zachodni Says

Polish consumer-price growth, which slowed more than economists forecasts in July to 4 percent, is still too high for the central bank to cut interest rates this year, according to economists at Bank Zachodni WBK SA.

Inflation slowed from 4.3 percent in June and was less than the 4.1 percent median estimate of 33 economists in a Bloomberg survey, the statistical office in Warsaw said today.

“It seems that this is not enough to encourage a majority of MPC members to cut interest rates this year, especially as CPI will remain close to 4 percent (much above target) until late autumn,” economists at Bank Zachodni led by Maciej Reluga wrote in a note to clients today. “Nevertheless, a gradual easing of the council’s stance will probably be visible, supporting the shorter end of the yield curve.”

Rate cuts next year can’t be ruled out, “especially if the economic growth slowdown proves to be deeper than previously expected,” the economists said in the note.

Poland’s central bank isn’t ruling out lowering borrowing costs, though the case for doing so isn’t yet clear, Anna Zielinska-Glebocka of the rate-setting Monetary Policy Council was cited as saying by PAP newswire after today’s data. The bank should lower rates next month due to the euro area’s deepening contraction and a recent weakening in Polish growth, Council member Elzbieta Chojna-Duch said on TVN CNBC after the inflation report.

Economic growth will probably slow to 2.7 percent this year, the European Commission estimates, from 4.3 percent in 2011. Three of Poland’s top five export markets, the U.K., the Czech Republic and Italy, are in a recession, while growth in the other two, France and Germany, is slowing.