Good news as inflation drops
Everyone expected inflation to fall in August from July's two-year annual high of 11.6%, but 10.7% outplayed a market consensus of around 11% and nodded to earlier forecasts that July was the zenith.
For the month, the overall CPI was down 0.3%, up against 0.6% monthly and 7.2% annually for the corresponding period of 1999. Food prices fell 1.1% in monthly terms 12.5% from last year and oil prices sank 4.7%, marking positive improvements in two closely watched CPI components.
Krzystof Bledowski, chief strategist at Wood & Co. brokerage, said prices fell for both core components like energy and food and many non-core goods and services.
"This confirms previous opinions that inflation's not a monetary phenomenon," he said.
Bledowski said to look for further reduction in food prices in September data, but said it's crucial that energy prices fall.
It's too early to consider the inflationary threat to be out of the picture, Bledowski said. Likewise, there's also little chance the Monetary Policy Council (RPP) will decide to notch down interest rates soon, he said.
But according to an Amerbank research report, "the (inflation) data was better than even the most optimistic forecasts." Amerbank, which expects interest rates to be cut by the year's end, had earlier predicted August inflation at 11.2% year-on-year.
Seasonal vegetable and fruit prices down 20% and 19% from the previous month pitched in to curb inflation, although sugar, bread and meat prices increased.
Inflationary pressure of the past months stems mainly from food and fuel prices that are often more determined by state regulation of agriculture and the fuel market than by market forces, analysts said.
Alhough the government's official inflation target of 5.4% to 6.8% is beyond reach, analysts are saying somewhere in the 9% range is probable. RPP member Dariusz Rosati last week said he believes 8% is attainable. In an effort to contain inflation, the RPP recently pushed up key interest rates by 150 basis points to 19% to 23%.
The satisfying August figures were also put to use on the market. Bond prices rose late Friday although price levels were tempered by profit taking. The market could be driven in the near term by speculation over monetary bias or interest rate cuts, according to Amerbank. Also, the National Bank of Poland announced its first issue of fixed-rate bonds Friday worth zl. 500 million ($116 million), which put a stop to a buying frenzy.
