Inflation in Poland bounded ahead to 4.0 per cent in December, data released Tuesday showed, as a pickup in consumer prices across Central Europe raises the prospects of the region's central banks hiking rates.
The Polish statistics office's announcement that annual inflation had edged up from 3.6 per cent in November, followed figures from Hungary showing the nation's inflation rate coming in at 7.4 per cent in December.
The release of the latest batch of Central European inflation data comes as part of the buildup to the round of regular monthly central bank meetings across the region at the end of the month.
"Today's number adds to the pressure on the Polish central bank to tighten monetary conditions further," said Lars Christensen, senior analyst with Danske Bank following the release of the latest annual Polish inflation data.
However, the likelihood of higher interest rates also coincides with expectations that growth in the leading Central European economies will slip back a gear in 2008 as the global economy loses momentum.
Christensen believes that the increase in consumer prices in what is Central Europe's biggest economy increases the chances of the Polish central bank delivering a 25-basis-point rise in borrowing costs at its meeting set down for January 30.
A 25-basis-point increase at the end of the month would bring Poland's benchmark rate to 5.25 per cent with the risk that the monetary authorities in Warsaw will continue tightening in the months ahead.
Poland and Hungary were two of the 10 largely Central European states that joined the European Union in May 2004.
Signs of resurgent inflation have been repeated in other nations that joined in the EU in May with consumer prices in Slovakia creeping up more than expected in December to 3.4 per cent compared with 3.1 per cent in November.
However, the national bank in Bratislava is widely expected to sit tight at its meeting this month as it attempts to press ahead with monetary integration with the eurozone ahead of Slovakia's hopes of joining the euro in January 2009.
Data also released this month showed rising inflation in the Czech Republic, thus fuelling speculation of a rate rise in the country, which was also one of the leading Central European economies that joined the EU four years ago.
Annual inflation in the Czech Republic came in at 5.4 per cent in December, compared to 5.0 per cent in November.
Data released this month has also pointed to continuing price pressures in the Baltics with both Latvia and Lithuania reporting inflation racing ahead in December.
Inflation in Lithuania nudged up to 8.1 per cent in December, while inflation in Latvia jumped to 14.1 per cent. ( Dpa )