Poland’s central bank cut borrowing costs for the first time since 2009 as the European Union’s biggest eastern economy slows amid the euro-area debt crisis.

The only central bank in the 27-nation EU to raise rates this year lowered the benchmark by 25 basis points to 4.5 percent, in line with forecasts by 34 economists surveyed by Bloomberg. One predicted a 50 basis-point cut. The bank will hold a news conference at 4 p.m. in Warsaw.

While central banks around the world have eased monetary policy to avert a recession, Poland’s raised rates by a quarter- point in May after inflation exceeded its 2.5 percent target for two years. Pressure to reverse the move grew after economic growth decelerated in the second quarter to the weakest since 2009 and inflation eased.

“Accumulating evidence of a weaker economy and the increasingly obvious slowdown in inflation finally persuaded central bankers to ease policy,” Dariusz Winek, chief economist at Bank BGZ in Warsaw, said in an e-mailed comment. “It’s the beginning of a cycle that may last up to nine months.”

Industry Shrinks

Policy makers signaled last month that they may cut borrowing costs if the economy slowed further, as statistical data have since confirmed. Industrial output shrank 5.2 percent in September, the first fall since May 2009, while retail sales grew at the slowest pace since August 2010.

The zloty was little changed after the rate announcement and traded at 4.1094 per euro at 3 p.m. in Warsaw, 0.3 percent higher than yesterday’s close. The yield on zloty-denominated two-year bonds jumped as high as three basis points to 3.854 percent after the decision and was down one basis point from the previous session at 3 p.m.

Three-month forward-rate agreements were 60 basis points below the three-month Warsaw Interbank Offered Rate, unchanged from yesterday, implying a half-point in reductions by the end of January. In August, they indicated expectations for a quarter-point cut within three months, data compiled by Bloomberg showed. Twelve-month FRAs were at 101 basis points below the three-month Wibor, signaling bets of four quarter- point reductions within a year.

‘How Far’

“The only question now is how far and how long this easing cycle will last,” Timothy Ash, head of emerging markets research at Standard Bank Plc in London, said in an e-mailed comment. “A lot depends on the zloty. It seems very strong in my mind.”

While the U.S. Federal Reserve is pursuing a third round of so-called quantitative easing and the European Central Bank unveiled an unlimited debt-purchase plan in September, Poland’s central bank said last month it would await updated forecasts before easing policy. New inflation and economic projections for 2012-2014 prepared by the central bank’s Economic Institute will be released at the central bank’s post-meeting statement.

Poland’s inflation rate was 3.8 percent for a second month in September, while the fourth quarter should bring an “evident decline” in the annual rate, “perhaps even to below 3 percent by year-end,” the Finance Ministry said Oct. 15. The central bank’s 2.5 percent price-growth target allows a divergence of plus or minus 1 percentage point.

‘Slow Significantly’

“While headline inflation remains well above target, it will probably slow significantly in the coming months and return to target in the first half of 2013,” Maja Goettig, a Warsaw- based strategist at KBC Securities, said today by phone.

Prime Minister Donald Tusk’s government is sticking to its 2.5 percent growth forecast for 2012, while trimming next year’s to 2.2 percent from a previously predicted 2.7 percent. Tusk warned last month that 2013 “will be another critical year, although nobody knows to what extent,” as the euro-area debt crisis continues to damp growth.

Poland relies on the euro area to buy more than half its exports, while the parent banks of five of its seven largest lenders are based in the 17-nation currency bloc. The ECB forecasts a 0.4 contraction this year for the euro-area economy. Poland’s gross domestic product expanded 2.3 percent from a year earlier in the March-June period, the slowest pace in eleven quarters.

Poland’s central bank “is one of the last orthodox inflation targeters,” Jaroslaw Janecki, chief economist at the Warsaw unit of Societe Generale, said by phone before the decision. Nonetheless, “pessimistic prospects for the real economy, combined with a better inflation outlook, should provide sufficiently strong arguments in favor of rate cuts.”

Bloomberg