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Poland Keeps Main Rate at Highest Since 2009 on Zloty Drop

Dec. 7 (Bloomberg) -- Poland’s central bank left its main interest rate unchanged at the highest level in almost three years to help defend the zloty and contain inflation that’s exceeded the official target for 13 months.

The Narodowy Bank Polski left the benchmark seven-day interest rate at 4.5 percent for a sixth month, the highest since January 2009, matching the forecast of all 32 economists in a Bloomberg survey.

Policy makers raised borrowing costs by a total of 1 percentage point this year to tame inflation and have reaffirmed plans to hold rates flat after price growth accelerated. Since the last increase in June, the zloty has shed 12 percent against the euro as investors shun emerging-market assets, pushing up import costs and helping keep inflation above the central bank’s 2.5 percent target.

“The chances for rate movements either way haven’t changed since the previous meeting,” Marek Belka, the bank’s Governor, told a news conference in Warsaw today. “Economic slowdown in the euro region and a weaker zloty offset each other as far as the impact on inflation goes.”

The regulator’s rate-setting board left borrowing costs unchanged when it last met on Nov. 9, citing a “volatile” zloty and expectations of a “milder” economic slowdown than the neighboring euro region.

Foreign-Currency Sales

The zloty, the sixth-worst performer since July among currencies tracked by Bloomberg, was little changed at 4.4676 per euro at 5:30 p.m. in Warsaw. The yield on the government’s 10-year bond fell 0.2 percentage point to 5.86 percent.

Sales of foreign currency during the last two months have made the zloty more stable than the Czech koruna, Belka said, promising to continue the policy of “intervening” to calm the market, without setting a specific exchange-rate target.

The zloty is the main risk to bringing inflation within the bank’s target, the regulator said in an e-mailed statement. A “gradual reduction in the growth of domestic demand amid a tightening of fiscal policy” will help curb price pressures, it added.

Consumer prices rose 4.3 percent from a year earlier in October after a 3.9 percent increase in September. Core inflation, which strips out volatile food and fuel prices, accelerated to 2.8 percent from a year ago in October from 2.6 percent the previous month.

Slower Growth

The central bank last month cut its 2012 economic-growth forecast to 3.1 percent from 3.2 percent. Gross domestic product grew 4.3 percent from a year earlier in the third quarter, more than economists forecast, bolstering projections for full-year expansion of 4 percent or more, Prime Minister Donald Tusk said Dec. 2.

Growth next year may depend on progress in solving the debt crisis in the euro region, which “is already in a mild recession,” according to a report last week by the Paris-based Organization for Economic Cooperation and Development. Poland’s economy, the only one in EU to dodge recession in 2009, may slow to 2.5 percent next year, the government estimates.

Forward-rate agreements used to speculate on changes in borrowing costs indicate a quarter-point rate cut in six months, while the median estimate of 29 economists in a Bloomberg survey suggests a reduction of that size by March. Still, some predict an increase, should the euro region’s crisis lead to further zloty depreciation and inflation.

Loans, Input Prices

Corporate loans grew 13.4 percent in October from a year earlier, accelerating from a 13 percent increase the previous month, according to central bank data.

Upward pressure on manufacturers’ input prices “remained stubbornly high” in November, even as demand weakened, HSBC Holdings said Dec. 1. The producer price index, an early indication of inflationary trends, has risen for four consecutive months, reaching 8.5 percent in October.

“With a weaker zloty and an increase in energy and diesel prices, the inflation rate will decline at a slower pace,” Monika Kurtek, chief economist at Bank Pocztowy, said in a note to clients. “Potentially worse inflation perspectives may mean interest rates remain unchanged throughout 2012.”

To contact the reporters on this story: Dorota Bartyzel in Warsaw

To contact the editor responsible for this story: Balazs Penz at

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