Polish central bank slashes key rate to record low

Poland's central bank on Wednesday slashed its key interest rate by half a percentage point to a record low 1.5 percent as it sought to ward off a dangerous bout of falling prices. The central bank "is under strong pressure from prolonged deflation. Relatively limited growth in GDP, lack of wage pressure and a stronger zloty certainly encourage a rate cut," leading economist Stanislaw Gomulka said, quoted by Poland's money.pl financial website. Expected by most analysts, the decision comes into effect on Thursday.
Consumer prices declined by 1.3 percent on an annual basis in January, while average annual inflation for 2014 came in at zero. Analysts caution that falling prices could see consumers put off purchases to buy goods when they are cheaper. This change in behaviour undercuts demand, which in turn hits company investment and jobs in a vicious deflationary cycle.