Poland Leaves Rates at Record Low for Eighth Month on Inflation

Poland’s central bank left its benchmark interest rate at a record low for an eighth month as inflation stays in check even as economy accelerates.

The Narodowy Bank Polski in Warsaw held its seven-day reference rate at 2.5 percent, as predicted by all 32 economists in a Bloomberg survey. Governor Marek Belka will comment on the decision at a news conference at 4 p.m.

Policy makers in February reaffirmed their plan to refrain from changing borrowing costs through mid-2014. Poland should enjoy record-low rates for most of this year as inflation remains subdued even with the economic-growth rate poised to almost double, central banker Andrzej Bratkowski said in Feb. 14 interview.

“We’re seeing a certain divergence as the economy picks up while price pressures remain practically frozen, so it’s not the right time to signal any change of policy,” Grzegorz Ogonek, an economist at ING Groep NV, said by phone from Warsaw on March 3. “The central bank will probably let the forward guidance expire and then switch to a wait-and-see mode.”

The zloty traded at 4.1874 at 12:51 p.m. in Warsaw, weakening 0.1 percent from yesterday and paring its 2.2 percent gain in February. Last month’s performance was the Polish currency’s best since July 2012. The yield on Poland’s 5-year government bond was unchanged at 3.69 percent after rallying from a six-month high of 4.11 percent on Jan. 31.

Economy Accelerates

The economy accelerated for a third consecutive quarter to 2.7 percent from a year earlier in the October-December period as the recovery in the euro region, Poland’s biggest trading partner, bolstered domestic demand.

The European Union’s largest eastern economy will expand 2.9 percent this year, the bloc’s third-fastest rate behind Latvia and Lithuania, the European Commission forecast last week.

Poland’s purchasing managers index, a gauge of manufacturing, surged to a three-year high of 55.9 in February, according to a Markit Economics survey for HSBC published on March 3. New orders rose the most since April 2004 while manufacturing employment rose “sharply,” the London-based research company said on its website.

Meanwhile, inflation undershot the central bank’s target for a 14th month in January, when it stabilized at 0.7 percent from a year earlier. Price growth won’t reach policy makers’ 2.5 percent objective before the end of 2015, according to the Narodowy Bank Polski’s inflation report from November.

Staff Projections

Rate setters reviewed new central bank staff projections for growth and inflation at today’s meeting and will summarize their findings in the post-meeting statement.

The document probably forecasts faster economic growth of about 3.5 percent in 2015 while lowering the estimate inflation track because of “favorable commodity prices and low current inflation,” Piotr Kalisz, an economist at Citigroup Inc. in Warsaw, wrote in an e-mailed note on March 3.

“We don’t expect any major changes in the central bank’s rhetoric for now,” Kalisz said. “We still assume that rate increases are possible at the end of this year as growth accelerates beyond its potential. Nevertheless, the first move may be pushed back into 2015 if inflation stays low.”

To contact the reporters on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net; 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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