CPI falls as the MPC wrings its hands
The Consumer Price Index dipped again in April to its lowest level in 12 months, sparking fears over economic growth and raising the possibility of an interest-rate cut before the general elections.
Inflation was at three percent in April, down from 3.4 percent in March. Any hikes in prices that many feared after Poland joined the EU last May have largely been absorbed by the economy or failed to materialize in the first place.
These latest figures are only slightly higher than analysts expected, and have raised the possibility of an interest-rate reduction in the near future. The imminent general and presidential elections will create volatility on the markets, and some rate-setters at the National Bank of Poland (NBP) appear unwilling to rock the boat further with an interest-rate cut ahead of the elections. The bank's main rate currently stands at 5.5 percent.
Analysts expect inflation to slip further, before bottoming out at around one percent, and many have voiced serious concerns over economic growth. The economy is experiencing something of a lull, as it waits for EU membership effects and a new government to get it back in gear.
"There is great uncertainty about what level growth will attain after the current weakness," rate-council member Andrzej Sławiński told daily Rzeczpospolita. Some at the central bank are advocating an immediate interest-rate cut to revive the flagging economy, as they believe financial markets, made skittish by the elections, would be even further disgruntled with a simultaneous interest rate fluctuation.
"The later the cut takes place, the bigger the political risk," Janusz Jankowiak, chief economist at BRE Bank told Reuters. "A 25-basis point reduction is possible even this month."
Economists at the NBP have already revised their growth forecasts from 4.5 to four percent, and are hinting at a further drop below this level. This low inflation rate creates a window for an interest-rate cut that could increase spending and fuel economic growth.
This is certainly not the view of the MPC as a whole, however, with another member, Dariusz Filar, saying there are no grounds for a cut. However, he does not exclude some "fine tuning" with the present 'neutral' bias. Filar also said that inflation could be driven in the second half of this year by the decrease in CPI, a revival in domestic demand and a growth in real wages. He also optimistically predicted GDP growth of four to 4.5 percent this year.
This creates an uncertain scenario, at best, with most financial institutions willing to sit on their hands for the moment, in the hope that either a move by rate setters or the general election, whichever happens first, will dictate events.
Inflation was at three percent in April, down from 3.4 percent in March. Any hikes in prices that many feared after Poland joined the EU last May have largely been absorbed by the economy or failed to materialize in the first place.
These latest figures are only slightly higher than analysts expected, and have raised the possibility of an interest-rate reduction in the near future. The imminent general and presidential elections will create volatility on the markets, and some rate-setters at the National Bank of Poland (NBP) appear unwilling to rock the boat further with an interest-rate cut ahead of the elections. The bank's main rate currently stands at 5.5 percent.
Analysts expect inflation to slip further, before bottoming out at around one percent, and many have voiced serious concerns over economic growth. The economy is experiencing something of a lull, as it waits for EU membership effects and a new government to get it back in gear.
"There is great uncertainty about what level growth will attain after the current weakness," rate-council member Andrzej Sławiński told daily Rzeczpospolita. Some at the central bank are advocating an immediate interest-rate cut to revive the flagging economy, as they believe financial markets, made skittish by the elections, would be even further disgruntled with a simultaneous interest rate fluctuation.
"The later the cut takes place, the bigger the political risk," Janusz Jankowiak, chief economist at BRE Bank told Reuters. "A 25-basis point reduction is possible even this month."
Economists at the NBP have already revised their growth forecasts from 4.5 to four percent, and are hinting at a further drop below this level. This low inflation rate creates a window for an interest-rate cut that could increase spending and fuel economic growth.
This is certainly not the view of the MPC as a whole, however, with another member, Dariusz Filar, saying there are no grounds for a cut. However, he does not exclude some "fine tuning" with the present 'neutral' bias. Filar also said that inflation could be driven in the second half of this year by the decrease in CPI, a revival in domestic demand and a growth in real wages. He also optimistically predicted GDP growth of four to 4.5 percent this year.
This creates an uncertain scenario, at best, with most financial institutions willing to sit on their hands for the moment, in the hope that either a move by rate setters or the general election, whichever happens first, will dictate events.
