Warsaw (Puls Biznesu) – After the CPI fell to 0.7 percent in December, economists expect interest rate cut in January.
As early as during its January meeting held on January 30th-31st, the Monetary Policy Council (MPC) may decide to lower interest rates for the first time since September. The majority of economists expect that. The CPI remains very low, much lower than the target inflation planned by the National Bank of Poland (the latter amounts to 2.5 percent).
“We should not fear quick inflation increase. Till the end of 2007, it may not get close to the middle of the target inflation”, Ryszard Petru, Bank BPH chief economist said.
MPC members also see no inflation risk. According to Miroslaw Pietrewicz, December PPI data, showing a 9.2 percent increase year-on-year should not increase the base inflation. In his opinion, a 50 points reduction is possible. Another MPC member, however, Andrzej Wojtyna, warns of political risk: too much uncertainty could influence exchange rates and growing inflation.
According to Marcin Mroz, Societe Generale chief economist, the January reduction will not be the last one.
“Much depends on inflation projection. If it shows that within 5-7 quarters, CPI will remain below the middle of the target, it is highly probable that MPC will cut rates by 25 points”, he believed.