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UPDATE 1-Polish March inflation at 3.6 pct, ahead of forecasts

Published 04/15/2009, 09:20 AM
Updated 04/15/2009, 09:32 AM
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* Analysts expected 3.4 percent price rise

* Food prices on back of weaker zloty seen as main culprit

* Central bank could keep rates unchanged in April

(Adds cbanker, analyst comment, detail)

WARSAW, April 15 (Reuters) - Polish consumer prices rose 3.6 percent year-on-year in March, above forecasts, boosting chances the central bank will pause the monetary easing campaign it started in November, analysts said.

Analysts in a Reuters poll had expected prices to have risen 3.4 percent year-on-year last month. In month-on-month terms, consumer prices in March rose 0.7 percent, also outpacing an expected 0.4 percent rise.

Poland's central bank has slashed rates by a total of 225 basis points to an all-time low of 3.75 percent to support the sharply slowing economy on the back of the global crisis.

In a Reuters poll last week a small majority of analysts had expected the MPC to deliver a 25 basis point cut when it meets later in April, but some members of the Monetary Policy Council said they could hold fire this month.

"For sure inflation at 3.6 percent increases the possibility there will be a pause in rate cuts," said Piotr Bielski, senior economist at Bank Zachodni WBK. "This data is a surprise for us. We assumed a much slower growth in food prices which were crucial for the inflation to come in higher."

The central bank's Jan Czekaj told Reuters that an April rate cut "is not a done deal."

"Should high inflation persist this will limit the scope for rate cuts, but one can assume that with economy slowing down demand pressure will be falling," he said.

Some analysts and central bankers warned earlier inflation could temporarily rise in the Spring but retreat later in the year due to downward pressure from the economic slowdown.

"This (data) is not, however, anything pointing to rising inflationary pressures," Bielski added.

"These are temporary disturbances which will not impact medium term inflationary perspectives," Bielski said. "Inflation will continue falling because the economy is in a bad shape." (Reporting by Adrian Krajewski, writing by Kuba Jaworowski)

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