Polish inflation slowed to its weakest pace in seven years as the European Union’s largest eastern economy stalls, adding scope for more interest-rate cuts.
Polish economic growth matched an 11- year low in the first quarter, boosting the case for further interest-rate reductions by the nation’s central bank.
The Polish central bank’s unexpected cut in interest rates is prompting investors to anticipate more reductions, brushing aside Governor Marek Belka’s efforts to temper speculation for further easing.
Yields on Polish government bonds plummeted to record lows and the zloty strengthened after Narodowy Bank Polski unexpectedly cut interest rates.
Poland’s central bank cut its benchmark interest rate to a record low as the European Union’s largest eastern economy struggles with slowing growth.
European Central Bank President Mario Draghi’s expected interest-rate cut this week will clear the way for Poland to follow suit, prolonging the best rally in zloty bonds in five years, PineBridge Investments said.
Polish retail sales grew less than economists estimated in March as unemployment at a six-year high damped consumer spending, adding to arguments for more interest- rate cuts.
Polish central bankers didn’t vote on interest-rate cuts this month because of “ambiguous” signs of a recovery in the European Union’s largest eastern economy, minutes released today showed.
The zloty headed for its steepest decline since January after services and factory output shrank for a 15th month in the euro area, Poland’s largest trading partner.
Investors should shun zloty- denominated debt sold by Polish companies because an undeveloped secondary market hampers liquidity and skews pricing, according to the country’s biggest mutual fund.
"We concluded that consumer-price growth and high-frequency data show that the inflation rate could stay on a very low level."
- Marek Belka on May 08, 2013