WARSAW, July 31 (Reuters) - The zloty eased on

Wednesday, as data showed inflation in Poland rising less than

expected in July, though according to analysts the prospects

were not higher for interest rate cuts.

Poland's CPI accelerated to 4.2% on the year in July from

2.6% a month earlier, according to Wednesday's flash estimate,

mainly due to the effect of the government partially withdrawing

measures aimed at keeping down energy prices.

Analysts in a Reuters poll had expected July inflation to

rise 4.4% on the year.

Earlier this month, the National Bank of Poland (NBP), which

aims for inflation at 2.5% with a tolerance band of plus or

minus 1 percentage point, kept Poland's main interest rate

unchanged for a ninth month and governor Adam Glapinski said

that elevated inflation spelled steady rates till 2026.

By 0950, the Polish zloty weakened 0.1% against

the euro to 4.2950, near the lower end of its narrow range since

mid-July, but remains Central Europe's best performing currency

this year, gaining over 1%.

"The market might think that a lower (than expected)

inflation reading brings interest rate cuts closer, but that

will not be the case," Ipopema Securities analyst Marcin

Sulewski said.

"Inflation in July was lower than expected, but it will rise

in the coming months... As NBP governor Glapinski says, if

inflation is rising, you cannot lower interest rates," Sulewski

added.

The Hungarian forint eased 0.1% to 395.50 per

euro. It continued to slip after the worse-than-expected

economic output reading on Tuesday, according to a

Budapest-based currency trader.

Weak foreign demand held back Hungary's economy in the

second quarter, with gross domestic product (GDP) falling on a

quarterly basis for the first time in more than a year.

The Hungarian currency is the region's weakest performer

this year, shedding 3% against the euro.

The Czech crown which has also lost 3% to the euro

this year, eased 0.1% to 25.4460 per euro on Wednesday in the

run-up to Thursday's expected interest rate cut by the Czech

National Bank (CNB).

The CNB is widely expected to slow the pace of easing on

Thursday, with all analysts in a Reuters poll forecasting a

25-basis point cut, as it opts for caution with inflation risks

still in view and the crown weaker than expected.

"While market analysts are unanimously expecting reduction

in the pace of rate cuts to 25bp per step, the market may still

see some risk that the Czech central bank could repeat a rate

cut by 50bp," chief economist at Generali Investments CEE

Radomir Jac said.

"Weakening of the Czech crown, seen in the past weeks, was

to a large extent related to a sharper than expected rate cut

delivered by the CNB at the end of June."

Last month, the CNB cut its key rate by 50 basis points, on

the sharper end of expectations, but signalled a likely slowdown

in the pace of easing amid lingering inflation pressures.

Jac added that today's weakening of the crown was in line

with that of its regional peers.

CEE SNAPSHOT AT

MARKETS 1151 CET

CURRENCI

ES

Latest Previous Daily Change

trade close change in 2024

Czech 25.4460 25.4310 -0.06% -2.93%

crown

Hungary 395.5000 395.2700 -0.06% -3.11%

forint

Polish 4.2950 4.2910 -0.09% +1.15%

zloty

Romanian 4.9753 4.9763 +0.02% -0.02%

leu

Serbian 116.9800 117.0800 +0.09% +0.23%

dinar

Note: calculated from 1800 CET

daily

change

Latest Previous Daily Change

close change in 2024

Prague 1608.76 1598.740 +0.63% +13.77%

0

Budapest 73855.86 73475.88 +0.52% +21.83%

Warsaw 2419.55 2384.77 +1.46% +3.27%

Bucharest 18623.41 18534.75 +0.48% +21.16%

Spread Daily

vs Bund change

in

Czech spread

Republic

2-year 5-year 10-year Poland

2-year 5-year 10-year FORWARD

3x6 6x9 9x12 3M

interban

k

Czech Rep Hungary Poland Note: FRA are for ask prices

quotes

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