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Sancho Panza

Polish Deflation Deepens, Boosting Case For Rate Cuts

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Bloomberg 13/11/14

'Poland’s deflation extended to a fourth month, deepening more than economists estimated as pressure builds on the central bank to resume monetary easing.

Consumer prices dropped 0.6 percent in October from a year earlier after a 0.3 percent decline in September, the statistics office in Warsaw said today. The median estimate of 29 economists surveyed by Bloomberg was for a 0.4 percent decrease. Prices were unchanged from August.

The central bank surprised economists for two consecutive months, cutting its main rate more than forecast in October and defying predictions of further easing by leaving it unchanged last week. Last month’s decision, along with evidence that the economy is beginning to emerge from a slowdown, limit the risk of inflation staying below the 2.5 percent target in the medium term, the rate-setting Monetary Policy Council said Nov. 5.

The “data are clearly supportive of further monetary easing, despite the recent MPC decision to ignore negative headline inflation readings and a very low inflation outlook,” Michal Dybula, a Warsaw-based economist at BNP Paribas SA, said by phone.

The October inflation figures and a potentially “very soft” economic-growth number to be released tomorrow will trigger a cut to 1.75 percent from 2 percent next month, he said. The consumer-price index will remain below zero “well into” the first quarter of next year, Dybula said.

The zloty extended losses to trade at 4.2282 per euro at 3 p.m. in Warsaw, 0.2 percent weaker from yesterday. The yield on the government’s two-year bond fell 11 basis points to 1.71 percent.

Globally Driven

The deepening deflation was driven by food prices, which dropped 1 percent, and a 4.1 percent decline in fuel costs. The prices of clothing and shoes fell 4.9 percent, declining the most among all measured items.

The effectiveness of potential monetary easing in combating deflation has been debated by central bankers since the consumer-price index slipped below zero in July for the first time since monthly records began in 1982. The last time Poland had negative average inflation for a full year was 1971.

Some policy makers including Jerzy Hausner and Elzbieta Chojna-Duch argued that the decline can’t be reversed by rate cuts, because it’s underpinned by global prices.

“Deflation is imported and driven by low commodity and food prices,” Chojna-Duch said in an interview Nov. 10. “Those same forces will keep inflation very low over the coming months and lowering rates wouldn’t help that significantly.”

The central bank yesterday cut its estimate for average price growth this year to 0.1 percent from 0.2 percent, and to 1.1 percent from 1.4 percent for 2015. It sees inflation accelerating in 2016 to 1.6 percent, less than its July forecast of 2.3 percent.'

Edited by Sancho Panza

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The deepening deflation was driven by food prices, which dropped 1 percent, and a 4.1 percent decline in fuel costs. The prices of clothing and shoes fell 4.9 percent, declining the most among all measured items.

How awful for them.

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Is there anyone left in Poland? I thought they were all over here!

Bingo!

If half your customers disappear, what are you going to do?

Erm... Drop your prices?

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Forbes

Deflation is actually a good thing, because in a deflation prices drop and money becomes more valuable, so deflation encourages people to save money. Deflation rewards the prudent saver and punishes the profligate borrower. The way a society, like an individual, becomes wealthy is by producing more than it consumes. In other words, by saving, not borrowing. And during a deflation, when money becomes more valuable, everybody wants money. They want to save. Whereas during an inflation, you want to get rid of the money. You want to consume. You want to spend. But you don’t become wealthy by spending and consuming; you become wealthy by producing and saving.

Fear not deflation. Ultimately, the market will reach an equilibrium between investment and savings because in the absence of an equilibrium the benefits of a savings-only strategy would evaporate. Proper economic growth through sound investments will lead to a productivity-driven deflation.

Edited by GinAndPlatonic

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Quote But deflation also creates many winners, and it also punishes many ‘political entrepreneurs’ who had thrived on their intimate connections to those who control the production of fiat money.

Edited by GinAndPlatonic

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The population of Poland is around half a million higher than 10 years ago when "they all came over here".

http://www.upi.com/Top_News/World-News/2010/04/01/Poland-concerned-about-population-decline/UPI-24881270141918/

http://www.worldbank.org/en/news/opinion/2012/06/14/poland-aging-and-the-economy

You have the depth of a shallow puddle. But id sooner a Pole living hear than someone whose existence is paid for by renting out property.

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If you are referring to me old chap then try again.

http://www.upi.com/Top_News/World-News/2010/04/01/Poland-concerned-about-population-decline/UPI-24881270141918/

http://www.worldbank.org/en/news/opinion/2012/06/14/poland-aging-and-the-economy

You have the depth of a shallow puddle. But id sooner a Pole living hear than someone whose existence is paid for by renting out property.

Sorry I thought the thread was about Poland and deflation this year not in 2035. Do you deny that the Polish population has grown over the past 10 years since you and your cronies say they are "all over here"

As for the bit about living off the proceeds of rental property, maybe you should target your UKIP housing spokesman before you have a go at me.

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