Record low Inflation surprises analysts, pushed down by lower food prices

Food prices plunged to new lows in the first half of July leading analysts t o yet again revise down inflation forecasts. Most of them now expect the con sumer price index to fall to a new all-time low of 1.3% to 1.4% in July. "Th e process of deflation of food prices began a few months ago and is gaining momentum. This shows that the surpluses on the food market are huge," said M aciej Reluga, chief economist at BZ WBK bank. The main force driving food pr ices down were vegetables, which were a staggering 29.6% cheaper than in the previous month. "The data is shocking. We expected inflation in July to incr ease slightly to 1.7% due to the increase in the price of electricity," said CAIB Securities economist Iwona Pugacewicz-Kowalska. Some analysts now expec t the new inflation low to result in a 0.5 point interest rate cut in August . (Gazeta Wyborcza, July 27-28, p. 24) T.J.