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UPDATE 3-Pressure mounts for Polish rate cut after data

Published 12/15/2008, 01:40 PM

(Adds MPC swing voter Slawinski, paragraph 9-10)

By Gabriela Baczynska and Karolina Slowikowska

WARSAW, Dec 15 (Reuters) - Momentum built on Monday for Poland's central bank to cut interest rates swiftly as price and wage growth eased more than expected in November and some policymakers demanded aggressive action.

Analysts said the bank's Monetary Policy Council (MPC) could slash rates by as much as 50 basis points at its monthly meeting on Dec. 23 to help cushion the impact of the slowing economy both in Poland and in the euro zone, its main trade partner.

Governor Slawomir Skrzypek, who holds a sometimes crucial casting vote on the bank's 10-strong policy council, said it should cut by more than 25 basis points, and two other members agreed. But other policymakers remained more cautious.

Statistics office data on Monday showed Polish consumer prices rose 3.7 percent year-on-year last month, slightly below a market forecast of 3.8 percent.

Month-on-month inflation grew 0.2 percent in November against a forecast of 0.3 percent.

"All of the data are lower than previously expected," said Piotr Kalisz, senior economist at Bank Handlowy in Warsaw.

"In our opinion the data are likely to prompt the Monetary Policy Council to cut rates, and the Council may decide to cut (rates) by 50 basis points as soon as December."

Poland had been relatively reluctant to join other European central banks in cutting rates, citing still-strong growth and a tumbling zloty currency, but the MPC launched a monetary easing cycle last month with a 25 basis point reduction, lowering the bank's main rate to 5.75 percent.

In an interview due to be published on Tuesday in the Rzeczpospolita daily, Andrzej Slawinski, a moderate swing voter on the MPC, said cuts of more than 25 basis points may be needed in view of worsening economic conditions.

He did not say whether he thought such a cut should come this month but his comments echoed those of governor Skrzypek, who earlier told public radio Poland needed "much more decisive steps" than last month's 25 basis point reduction.

CAUTION

Even Halina Wasilewska-Trenkner, seen by analysts as a policy hawk, said she did not rule out bigger than quarter-point cuts in the future, though she said the next reduction should come in 2009, not this month.

"Yes (there is room for monetary easing) but this should be done carefully," she told radio Tok FM after the release of the November data.

Moderate MPC member Andrzej Wojtyna also struck a more cautious note.

"My understanding of the situation favours arguments for small steps," he said. "For two months now I have been focusing on the exchange rate... If the council decides on a 50 basis point cut, this could mean it has access to data that is worse than the market expects," he told Reuters.

The zloty briefly broke the key psychological level of 4.0 to the euro in mid-afternoon trade, though traders said the fall was linked not to the latest data but to continued concerns over Polish companies' exposure to currency options.

In other data released by the statistics office on Monday, corporate sector wages grew 7.4 percent year-on-year in November to 3,321 zlotys per month, against a forecast of 8.6 percent.

"Generally, all this data... gives one signal -- that the inflation outlook is improving," said Piotr Bielski, an economist at Bank Zachodni WBK.

"Job market growth is also easing which is also good for the inflation outlook. This all supports an interest rate cut already in December. The question now is how deep the cut will be," he said. (Writing by Gareth Jones, editing by Patrick Graham)

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