The Polish central bank may be forced to raise borrowing costs as early as the first half of this year as inflation remains above target and the economy is set to grow faster than the government expects, Monetary Policy Council member Andrzej Bratkowski said.
Bratkowski spoke in an interview yesterday in Warsaw.
On economic growth:
“Recent weeks have given us evidence that we shouldn’t fear any dramatic slowdown in the European Union. That changes Poland’s expectations entirely, much improving the outlook for our economic performance. Apart from the better-than-expected situation in the EU, Polish data also support the view that we’re unlikely to see a sharp slowdown which would justify interest-rate cuts. We can expect GDP growth of about 3.5 percent in 2012. But it’s becoming increasingly likely that we won’t see an economic slowdown in Poland at all.”
“The January inflation figures weren’t fantastic; after all, we’d predicted that inflation would slow down from January even without the zloty appreciation we’ve been observing. So we can say that inflation was in line with our expectations. The decline in the inflation rate means the danger of it continuing to grow has receded, and increases the probability that it will move toward the 2.5 percent target in the next three quarters. In my opinion, though, if economic growth stays above 4 percent, it’s fairly unlikely that inflation will return to the target without rate increases.”
“Poland’s strong economic growth justifies the Monetary Policy Council’s ‘wait-and-see’ stance. It’s true that the zloty’s appreciation gives us more time to observe developments, but this state of affairs can’t continue for too long. With each month that goes by, there is less room to simply monitor the situation and more need to take a decision on interest rates. After the latest economic data, which diminish fears about an economic slowdown, I’d assess the probability of MPC’s next decisions as follows: 50 percent that interest rates remain unchanged; 40 percent that they’re raised and 10 percent that they’re cut. In my opinion, the question is less and less whether and more and more when to raise rates. It’s getting more likely that a rate hike will be necessary in the first half of the year.”