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Poland Keeps Benchmark Rate at Record Low for Fifth Month

Poland’s central bank maintained 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 kept its seven-day reference rate at 2.5 percent, matching the prediction of all 37 economists in a Bloomberg survey.

Steady borrowing costs will support inflation’s gradual return to the central bank’s target while fostering economic recovery and market stability, Monetary Policy Council said in its post-meeting statement. The panel reiterated its pledge from last month that rates should stay unchanged through “at least” the end of the first half of 2014.

“Nothing’s changed to alter our policy guidance” since last month, Governor Marek Belka told reporters at a press conference in Warsaw today, adding that “all” policy makers agree with the plan.

Poland’s economy grew 1.9 percent in the third quarter from a year earlier, the fastest pace since mid-2012, as a recovery from the country’s worst slowdown in at least a decade takes hold. The central bank is “pleased” with the acceleration, and especially with reviving domestic demand and fixed investments, Belka said. He “didn’t rule out” that economic growth next year may beat the 2.9 percent forecast in last month’s inflation report.

Low Pressure

The yield on the government’s two-year zloty bond fell one basis point, or 0.01 percentage point, to 2.92 percent at 6 p.m. in Warsaw. The zloty strengthened 0.1 percent from yesterday to 4.2003 per euro, holding to its three-month gain of 1.8 percent, the second-best performance among 24 emerging-market currencies tracked by Bloomberg, behind the Indian rupee.

Demand and cost pressures in Poland’s economy are “low” and inflation pressure remains “limited,” according to the Monetary Policy Council’s post-meeting statement. The central bank’s inflation outlook published Nov. 12 shows price growth may stay below its target of 2.5 percent through 2015. Policy makers have cut borrowing costs by 2.25 percentage points since November 2012.

Consumer price growth slowed to 0.8 percent in October from a year earlier, a four-month low, and has remained below the central bank’s tolerance range of 1.5 percent to 3.5 percent since December 2012.

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 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.

“Lower-than-projected inflation, a prolonged period of ultra-loose monetary policy abroad and the upcoming new appointment to the Monetary Policy Council may all help delay the first rate hike until autumn 2014,” Maciej Reluga, chief economist at Bank Zachodni WBK, said today in an e-mailed note.

The 10-member rate panel will probably get a new member this month to replace Zyta Gilowska, who resigned in October. Gilowska voted for one of the central bank’s eight rate cuts since November 2012 and had backed a quarter-point increase in May 2012, the only one to take place in the EU last year.

President Bronislaw Komorowski has already picked Gilowska’s replacement and will announce his choice after his Dec. 13 return from a trip to the Persian Gulf, presidential Minister Olgierd Dziekonski said today by phone.

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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