Inflation hits new low

Polish annual inflation defied expectations and sank to a new post-communist low of 3.5% in January, data showed late last week, adding pressure on the central bank to lower borrowing costs further. But Monetary Policy Council (RPP) member Grzegorz Wójtowicz tried to cool investors' rate cut hopes, saying increases in controlled prices would push up inflation this month. The Central Statistical Office (GUS) said consumer prices grew 0.8% month on month in January after a 0.2% rise in December but the year-on-year index eased by a tenth of a point to 3.5%. Analysts had expected inflation to rebound slightly to 3.7%. They forecast inflation gradually rising to 4.7% by the end of this year, according to a Reuters poll. "Recent comments by the RPP members have cooled interest rate cut expectations," said Katarzyna Zajdel-Kurowska, head of treasury research at Bank Handlowy. "With these figures in the market we can expect those expectations to grow again." The złoty strengthened slightly on the data release, trading at 4.1683 to the dollar and 3.6401 vs. the euro Friday afternoon. The RPP last cut its main interest rate by 150 basis points to 10% in January and most analysts now pencil in another easing in March or April as a slowing economy keeps a tight lid on price pressures. - Reuters