Poland’s rate setters will take a break in monetary easing before lowering borrowing costs twice more as economic growth falls short of potential, according to Morgan Stanley.
The Narodowy Bank Polski will leave rates at 3.75 percent at its March 6 meeting after four consecutive reductions and resume loosening policy in the second quarter to take the benchmark to 3.25 percent, Pasquale Diana, an economist at Morgan Stanley in London, wrote in an e-mailed note today.
The bank dropped language from its statement after lowering rates a quarter point on Feb. 6 that further reductions can’t be ruled out. While Governor Marek Belka said policy makers will need to “take stock” of the impact of previous cuts at some point, he also said the bank hasn’t abandoned its easing bias.
“The thinking here seems to be that, after four consecutive rate cuts, there is a case to be made for a calm reassessment of the situation,” Diana wrote. “That pause, however, should not be interpreted as the end of the easing cycle.”
Risks to Morgan Stanley’s 1.5 percent Polish growth forecast for this year are “tilted to the downside,” given the economy in the fourth quarter was “on the brink of outright contraction,” Diana wrote.
Gross domestic product grew 0.1 percent to 0.2 percent last quarter from the previous three months, compared with a 0.4 percent increase in the third quarter, he wrote, based on the full-year growth figure of 2 percent.