Poland Will Probably Leave Benchmark Rate at Record Low

Poland’s central bank will probably leave its benchmark interest rate at a record low for a fifth month today as a recovery in the European Union’s largest eastern economy poses no risk for inflation.

The Narodowy Bank Polski in Warsaw will keep the reference rate at 2.5 percent, according to all 37 economists in a Bloomberg survey. Governor Marek Belka will comment on the decision at a news conference at 4 p.m.

“Today’s meeting raises no doubts whatsoever,” Piotr Bujak, an economist at Nordea Bank in Warsaw, said on Dec. 2. “Next year’s decisions, though, are becoming increasingly uncertain, considering monetary easing in the euro zone.”

Poland’s economy grew 1.9 percent in the third quarter from a year earlier, the fastest pace in more than a year, as a recovery from the country’s worst slowdown takes hold. Still, a surprise rate cut by the European Central Bank last month raised questions about the ability of Polish policy makers to stick to their pledge of keeping borrowing costs unchanged until the middle of 2014.

The yield on the government’s two-year government bond fell one basis point, or 0.01 percentage point, to 2.92 percent as of 10:32 a.m. in Warsaw, dropping from its highest level since Oct. 18. The zloty gained 0.1 percent to 4.2007 per euro, extending its advance to 1.8 percent over the past three months. That’s the second-best performance among 24 emerging-market currencies tracked by Bloomberg behind the Indian rupee.

Diverging Region

Eastern Europe’s monetary authorities are diverging as their economies show varying degrees of health. Hungary on Nov. 26 cut its benchmark interest rate to a record-low 3.2 percent, its 16th consecutive reduction, and signaled further easing is possible. Romania lowered its benchmark for a fourth month on Nov. 5 on slowing inflation. Russia’s central bank last month chose to extend a pause on interest rates held since an increase in September 2012.

The Polish central bank last month said it plans to leave the benchmark rate unchanged until at least mid-2014 because the inflation rate may stay below its target of 2.5 percent through 2015. Policy makers have cut borrowing costs by 2.25 percentage points since last November.

Third-quarter growth data shouldn’t lead to any important changes in rate policy, “though further cuts in rates by other central banks along with weak economic growth in Poland could trigger a similar move by Polish policy makers,” Elzbieta Chojna-Duch, a member of the Monetary Policy Council, told the PAP news service Nov. 29.

Inflation Slows

While consumer demand grew for a second quarter, it still isn’t strong enough to lead to concerns that inflation may accelerate, policy maker Anna Zielinska-Glebocka said last week, adding that borrowing costs may be held until the third quarter of 2014.

The inflation rate fell to 0.8 percent in October, a four-month low, staying below the central bank’s target range of 2.5 percent to 3.5 percent since December 2012.

The European Commission raised its 2013 growth estimate for the Polish economy to 1.3 percent from 1.1 percent. GDP may advance 2.5 percent in 2014 and 2.9 percent the year later, the commission said.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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