Polish April Deflation Letup Boosts Pledge for Stable Rates

Polish deflation eased for a second month in April, bolstering the case for the central bank to keep interest rates unchanged as economic growth gathers pace.

Consumer prices fell 1.1 percent from a year earlier after a 1.5 percent decline in March, the statistics office said on Thursday. The median estimate of 33 economists surveyed by Bloomberg was for a 1.2 percent decrease. Prices rose 0.4 percent from a month earlier.

Poland’s longest stretch of deflation in at least three decades is starting to abate after the price drop prompted the central bank to cut borrowing costs to a record low. Policy makers signaled they may keep rates steady beyond 2015 as slack remains in the economy amid a gradual recovery.

“Policy makers have clearly said that they aren’t going to change borrowing costs until the end of their term” early next year, Monika Kurtek, chief economist at Bank Pocztowy SA, said in an e-mailed comment. “Easing deflation is a factor that will definitely help them stick to their promise.”

The zloty strengthened after the data release to trade 0.7 percent stronger at 4.0696 against the euro at 3:28 p.m. in Warsaw. The currency has appreciated 5.1 percent this year. The yield on the government’s two-year zloty bond fell two basis points to 1.76 percent.

“Consumer prices should gradually increase in the coming months and reach positive territory at the end of this year,” Jaroslaw Janecki, chief economist for Poland at Societe Generale SA, said in an e-mailed note.

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