Polish core inflation quickens as weaker zloty fuels prices

Poland’s core inflation rate rose at a faster pace in October as a weaker zloty spurred price growth, leaving less room for policy makers to reduce borrowing costs as the euro region’s debt crisis damps export demand.

Core inflation accelerated to 2.8 percent from 2.6 percent in September, the Warsaw-based National Bank of Poland said today. That exceeded the 2.6 percent median forecast of 20 economists surveyed by Bloomberg. It increased 0.3 percent from the previous month.

The faster pace mirrors quicker consumer-price growth, which reached 4.3 percent from a year ago in October, prompting central bankers Anna Zielinska-Glebocka and Elzbieta Chojna-Duch to reaffirm plans to keep interest rates unchanged. The zloty has lost 13 percent against the euro in the last six months, boosting the cost of imports.

“The impact of the zloty’s weakness on prices, as well as depreciation pressure from the turmoil in the euro area, has put our rate-cut scenario at risk,” economists at ING Bank Slaski wrote today in an e-mailed comment before the release. The central bank “will need more important signals of an economic slowdown in Poland and the inflation rate returning to target before it considers easing its policy bias.”

The regulator is targeting inflation of 2.5 percent. Core inflation excludes food and fuel prices.