Poland’s central bank left borrowing costs unchanged in June to see whether last month’s interest-rate increase is enough to contain inflation amid an economic slowdown.
Most members of the Monetary Policy Council wanted to wait for more economic data and new inflation forecasts in July before deciding whether rates should rise again, according to the minutes of the June 6 meeting, published today by the Warsaw-based bank. Some “believed another interest-rate adjustment may be justified in the coming period, should the expected economic slowdown prove moderate.”
As central banks from Turkey to Brazil ease monetary policy to offset Europe’s debt crisis, the Narodowy Bank Polski raised its benchmark seven-day rate to 4.75 percent in May to combat inflation, which has topped its target range for 15 months. Investor confidence in Germany, Poland’s main trading partner, fell the most in 14 years in June.
“The minutes show a more divided MPC with less certainty over the future direction,” Peter Attard Montalto, a London-based economist at Nomura International Plc, said today by e-mail. “This makes the overall tone more dovish but I wouldn’t say there are any great surprises -- the key is they agree to wait and see on the new data and forecasts.”
The zloty traded at 4.2478 per euro at 3 p.m. in Warsaw, unchanged from yesterday. The yield on the government’s two-year bond was also unchanged at 4.7 percent.
Since the rate meeting two weeks ago, data showed inflation unexpectedly decelerated to 3.6 percent in May, the slowest in 15 months, while industrial-output growth quickened to 4.6 percent from 2.9 percent in April. Poland’s economy will grow 2.7 percent this year, the fastest pace in the European Union, according to the bloc’s executive arm.
“Some policy members pointed out that the slowdown in major emerging economies, which are important recipients of German exports, may translate through trade links between Poland and Germany into further weakening of Polish exports,” the bank said in the minutes.
May’s rate increase was the first such move in Poland since last June and the first in the EU this year. The council will hold its next rate meeting July 3-4.