Polish Inflation Slows in Boost to Case for Stable Rates

Polish inflation slowed to a four-month low in September, bolstering the central bank’s plan to hold interest rates steady.

Consumer prices rose 1 percent from a year earlier, less than last month’s 1.1 percent advance, the Warsaw-based statistics office said today. The median estimate in a Bloomberg survey of 36 economists was 1.1 percent. Prices rose 0.1 percent from August.

Central bank Governor Marek Belka supports keeping interest rates at a record low until mid-2014 as the European Union’s largest eastern economy recovers “very gradually” from a slowdown. While manufacturing expanded at the fastest pace in more than two years in September, inflation has lagged behind policy makers’ 2.5 percent goal for nine months.

“The demand pressure on prices is muted,” Piotr Bujak, chief economist for Poland at Nordea Bank AB, said by e-mail. “Interest-rate increases are still a distant prospect.”

The zloty gained 0.2 percent to 4.1747 per euro at 4:26 p.m. in Warsaw, strengthened from 4.1837 before the data was released. The yield on two-year notes rose less than one basis point to 2.94 percent.

A 6.9 percent decline from the previous month in the cost of education services was the main reason why inflation undershot in September, according to economists at BRE Bank SA and Bank Zachodni WBK SA. The government cut payments for extracurricular activities at public kindergartens last month.

“The data confirm the absence of inflationary pressures in the Polish economy,” Nora Szentivanyi, economist at JPMorgan Chase & Co. in London, said by e-mail. “We continue to see only a gradual rise in inflation over the coming year” and it will remain below the target through 2014, she said.

Before it's here, it's on the Bloomberg Terminal.