Low CPI data may cause interest rate cuts

APA - Austria Presse Agentur
opublikowano: 17-01-2006, 16:55

Warsaw (Puls Biznesu) – The CPI data surprised the market, which may make the Monetary Policy Council cut interest rates.

Warsaw (Puls Biznesu) – The CPI data surprised the market, which may make the Monetary Policy Council cut interest rates.

In December, CPI fell to 0.7 percent, the lowest level in Europe and 0.2 percent less than in November, the Central Statistical Office GUS said. The result was better than 0.8 percent forecast by the market.

“Positive CPI data reinforce expectations for interest rate reduction”, Piotr Bujak, BZ WBK economist said.

Food prices fell 1.5 percent year-on-year, clothes 5.2 percent and shoes 8.6 percent. Transport costs grew 2.3 percent mainly due to higher fuel prices (6.4 percent increase).

“The cumulated effect of zloty appreciation, which we have observed for some dozen months now, was another positive factor”, BZ WBK economist added.

According to Janusz Jankowiak, BRE Bank economist, the projected inflation will be of importance for the market.

“I believe, inflation will not come back to the target of the central bank of 2.5 percent till the end of 2007. Low inflation plus slower GDP growth opens the way to reduce interest rates by further 50 base points”, Janusz Jankowiak said.

Today, the reference rate amounts to 4.5 percent, with interest rates being the highest in EU.

Another reason to cut rates are the data about companies. In December, the growth rate of remuneration, fell to 1.5 percent.

“Remuneration growth dynamics is growing but it is no danger to inflation because profitability is growing faster”, Piotr Bujak stressed.

The labor market situation is improving. Employment rose by 2.5 percent.

 

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Podpis: APA - Austria Presse Agentur

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