Inflation: Demand Destruction To Outweigh Zloty Weakness

The precipitous decline of the Polish zloty in previous months and potential hiatus for the central bank's monetary loosening agenda, could risk reigniting inflationary pressures in the short term. However, we hold to our view that the sharp slowdown in consumer and investment spending during H209, implicit in our forecast 2.7% full-year economic contraction, will pull headline inflation down towards 1.3% by end-2009.

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