By Kuba Jaworowski and Marcin Goettig
WARSAW, Aug 3 (Reuters) - Poland's inflation is likely to stay well above the central bank's target in July and Monetary Policy Council members said price growth could stay high in the coming months, reducing the likelihood of interest rate cuts.
The finance ministry on Monday forecast inflation last month at 3.5 percent year-on-year, unchanged from June, and 1 percentage point above the central bank's target.
For a table with more finance ministry's inflation forecasts click on:
The central bank expected July price growth at 3.4 percent.
At the end of the year, inflation could stand at close to 3.5 percent, two of the central bank's MPC members, Dariusz Filar and Halina Wasilewska-Trenkner, said, commenting on the data.
Room for monetary easing, which already comprised 250 basis points since last November, was small, they said.
'I think the main Polish rate should not be lower than it is now,' Wasilewska-Trenkner told radio TOK FM in an interview.
The main interest rate currently stands at an all-time low of 3.5 percent and analysts polled by Reuters expect the MPC to deliver one more 25 basis point cut until the end of 2009.
GROWTH SIGNS
Inflation in Poland has been stubbornly high despite the sharp economic slowdown and weak demand, mostly due to food and regulated prices.
This has prompted the central bank to hold fire on rates in July and signal that interest rates may stay unchanged until the term of the current MPC ends early in 2010.
'I think that this council will not cut rates any more,' said Grzegorz Maliszewski, chief economist at Millennium Bank in Warsaw.
'They won't cut because inflation is easing slower (than earlier thought), there are symptoms of improvement in the industrial sector, the economy does not look as bad as many feared and the zloty is gaining,' he added.
Earlier on Monday data showed the Purchasing Managers' Index (PMI) rose by a record 3.5 points to 46.5 points in July, the highest level since June 2008. In June industrial output beat forecasts and rose 6.2 percent in monthly terms.
Another MPC member, key swing voter Jan Czekaj, commenting on July's PMI data, said this boded well for growth.
'This (PMI data) shows that we're emerging from the crisis but it won't happen in a day or even two,' Czekaj told Reuters by phone.
Filar also said the data confirmed the worst was over for Poland's economy.
The PMI figure, along with positive sentiment on the global stock exchanges, boosted the zloty, which gained more than 1.5 percent against the euro on the day, trading at 4.0875 at 1500 GMT.
Poland's government expects the European Union's largest ex-communist economy to slow to 0.2 percent in 2009 from 4.9 percent in 2008 but the central bank is more optimistic and sees an 0.8 percent expansion.
Thanks to its 38-million people-strong domestic market and relatively low reliance on exports, Poland is one of the few EU members to have escaped recession in the first quarter.
(Writing by Karolina Slowikowska and Kuba Jaworowski; Editing by Richard Balmforth) Keywords: POLAND INFLATION/ (karolina.slowikowska@reuters.com; +48 22 653 9725; Reuters Messaging: karolina.slowikowska.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WARSAW, Aug 3 (Reuters) - Poland's inflation is likely to stay well above the central bank's target in July and Monetary Policy Council members said price growth could stay high in the coming months, reducing the likelihood of interest rate cuts.
The finance ministry on Monday forecast inflation last month at 3.5 percent year-on-year, unchanged from June, and 1 percentage point above the central bank's target.
For a table with more finance ministry's inflation forecasts click on:
The central bank expected July price growth at 3.4 percent.
At the end of the year, inflation could stand at close to 3.5 percent, two of the central bank's MPC members, Dariusz Filar and Halina Wasilewska-Trenkner, said, commenting on the data.
Room for monetary easing, which already comprised 250 basis points since last November, was small, they said.
'I think the main Polish rate should not be lower than it is now,' Wasilewska-Trenkner told radio TOK FM in an interview.
The main interest rate currently stands at an all-time low of 3.5 percent and analysts polled by Reuters expect the MPC to deliver one more 25 basis point cut until the end of 2009.
GROWTH SIGNS
Inflation in Poland has been stubbornly high despite the sharp economic slowdown and weak demand, mostly due to food and regulated prices.
This has prompted the central bank to hold fire on rates in July and signal that interest rates may stay unchanged until the term of the current MPC ends early in 2010.
'I think that this council will not cut rates any more,' said Grzegorz Maliszewski, chief economist at Millennium Bank in Warsaw.
'They won't cut because inflation is easing slower (than earlier thought), there are symptoms of improvement in the industrial sector, the economy does not look as bad as many feared and the zloty is gaining,' he added.
Earlier on Monday data showed the Purchasing Managers' Index (PMI) rose by a record 3.5 points to 46.5 points in July, the highest level since June 2008. In June industrial output beat forecasts and rose 6.2 percent in monthly terms.
Another MPC member, key swing voter Jan Czekaj, commenting on July's PMI data, said this boded well for growth.
'This (PMI data) shows that we're emerging from the crisis but it won't happen in a day or even two,' Czekaj told Reuters by phone.
Filar also said the data confirmed the worst was over for Poland's economy.
The PMI figure, along with positive sentiment on the global stock exchanges, boosted the zloty, which gained more than 1.5 percent against the euro on the day, trading at 4.0875 at 1500 GMT.
Poland's government expects the European Union's largest ex-communist economy to slow to 0.2 percent in 2009 from 4.9 percent in 2008 but the central bank is more optimistic and sees an 0.8 percent expansion.
Thanks to its 38-million people-strong domestic market and relatively low reliance on exports, Poland is one of the few EU members to have escaped recession in the first quarter.
(Writing by Karolina Slowikowska and Kuba Jaworowski; Editing by Richard Balmforth) Keywords: POLAND INFLATION/ (karolina.slowikowska@reuters.com; +48 22 653 9725; Reuters Messaging: karolina.slowikowska.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.