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Polish Rates May Rise This Month, Glapinski Says

The zloty weakened 2.3 percent against the euro in the six weeks through Dec. 22. Photographer: John Guillemin/Bloomberg
The zloty weakened 2.3 percent against the euro in the six weeks through Dec. 22. Photographer: John Guillemin/Bloomberg

Jan. 3 (Bloomberg) -- Poland’s central bank may start increasing interest rates in January as the zloty has lost its power to keep inflation in check, Adam Glapinski, a member of the Monetary Policy Council, said today.

“Unless something drastic happens, we’ll be convening this month to consider beginning a tightening cycle,” Glapinski said in a phone interview from Warsaw. “Gradual rate increases should produce a delicate, systematic strengthening of the zloty and will also help slow down inflation.”

The bank has kept its main rate unchanged at a record low of 3.5 percent since June 2009 after reducing it by a total of 2.5 percentage points, which helped the country become the only European Union member to avoid recession. The bloc’s largest eastern economy expanded 4.2 percent in the third quarter, the fastest in two years, boosted by export orders from Germany.

The zloty weakened 2.3 percent against the euro in the six weeks through Dec. 22, when the policy makers left the central bank’s benchmark 7-day rate unchanged for the 18th month. Narodowy Bank Polski Governor Marek Belka said after the meeting that the currency’s weakness “argued in favor of increasing interest rates.”

‘Room to Strengthen’

Since those comments, the currency has stabilized as Bank Gospodarstwa Krajowego, a state-owned Polish lender that sometimes exchanges foreign currencies for the Finance Ministry, sold euros, helping the zloty appreciate to the strongest level in more than a month.

“The zloty of course has room to strengthen, but the appreciation will no longer be strong enough to offset inflation,” Glapinski said. “In the past, we saw the zloty as a more efficient instrument than a rate increase. Nothing like that will happen this year.”

Glapinski said the central bank may decide to increase interest rates as soon as in January.

“In any case, it will be in the first quarter,” he said.

Inflation probably accelerated to 3.1 percent last month, the highest since January 2010, from 2.7 percent the month before, the Finance Ministry said today. According to Piotr Kalisz, an economist at Citibank’s Bank Handlowy unit in Warsaw, consumer price increases are being driven by the weaker zloty and higher fuel prices.

‘Intensifying Wage Pressures’

“This year we could see the appearance of new factors fueling inflation, including intensifying wage pressures and higher prices of commodities,” Glapinski said.

Until recently, inflation in Poland has been driven by food and fuel prices, which policy makers often ignore because their fluctuations are governed by supply and little affected by rate decisions, according to Glapinski.

“The Council will send a message with a quarter-point rate increase in the first quarter,” said Lukasz Tarnawa, chief economist of PKO Bank Polski in Warsaw. “Most likely, it will happen in January, though the decision’s timing will be determined by the December inflation data and how the zloty reacts to the situation on international markets.”

Inflation may accelerate to 3.2 percent in December and 3.5 percent in January, reaching the upper end of the central bank’s target range that starts at 1.5 percent, according to PKO Bank Polski’s forecast.

Manufacturing expanded the most since May 2004 in December as demand in Germany boosted export orders. The purchasing mangers’ index advanced to 56.3 from 55.9 in November, HSBC Holdings Plc said today, citing a Markit Economics survey.

“We can count on the German growth locomotive picking up speed, and this in turn will give the Polish freight cars a strong tug,” Glapinski said, forecasting that the Polish economy may expand between 4 and 4.5 percent this year.

The zloty traded at 3.9505 per euro at 5:11 p.m. in Warsaw, up 0.4 percent from late on Dec. 31.

To contact the reporter on this story: Dorota Bartyzel in Warsaw at

To contact the editor responsible for this story: Willy Morris at

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