Polish Deflation Stays at Record to Leave Rate-Cut RoomPiotr Skolimowski
Poland’s consumer prices fell for a third month in September, giving the central bank leeway to continue cutting interest rates as the European Union’s largest eastern economy slows.
Prices dropped 0.3 percent from a year earlier, matching their decline in August, the statistics office in Warsaw said today. The median estimate of 34 economists surveyed by Bloomberg was for a 0.4 percent decrease. Prices were unchanged from a month earlier.
Poland’s central bank last week cut its main interest rate by a larger-than-expected half a percentage point and Governor Marek Belka said he couldn’t rule out more easing as inflation will stay “very low” for the foreseeable future. Policy makers are grappling with shrinking manufacturing and lower exports as Germany’s economy slows and Russia flirts with a recession because of sanctions over the Ukrainian conflict.
“Falling food and fuel prices continue to drive inflation deeper into negative territory,” Grzegorz Maliszewski, chief economist at Bank Millennium SA, said in an e-mailed note. “This decline should cement expectations for more interest-rate cuts.”
The zloty pared losses after the data to trade at 4.2077 per euro at 2:04 p.m. in Warsaw, 0.1 percent weaker from yesterday. The yield on the government’s two-year notes fell four basis points to 1.69 percent. Three-month forward-rate agreements traded 47 basis points below the Warsaw Interbank Offered Rate, signaling bets on almost two quarter-point cuts by the end of the year.