Central European Daily

The zloty extended its gains yesterday after the Polish statistical office reported that core inflation had reached 1 % y/y in June. It was the second news concerning price growth (following the headline June figure at 0.3 % y/y) that surprised markets on the upside. So far, reactions from the Polish central bank have been mixed. While right after inflation release on Tuesday, Elzbieta Choina Duch suggested that low inflation may induce central bank to cut rates till the end of the year, another NBP board member Andrzej Kazmierczak said yesterday that the current level of interest rate was optimal for the Polish economy and could remain unchanged for a long time. We believe that future monetary decisions in Poland will be determined not only by inflation (which, despite marginal pickups, stays well below the inflation target) but also by economical growth. In this perspective, today’s release of June industrial output will be even more interesting than it would be otherwise.