Polish central bankers didn’t vote on interest-rate cuts this month because of “ambiguous” signs of a recovery in the European Union’s largest eastern economy, minutes released today showed.
Still, some members of the 10-person Monetary Policy Council argued further monetary easing could be justified in the coming months if there were no “clear” signals of a rebound, according to an e-mailed document from the April 10 meeting. Others argued growth “was anticipated” to pick up in the coming quarters and further cuts were unnecessary.
Policy makers kept interest rates unchanged for the first time in five months in April on expectations that record-low borrowing costs will revive the economy. The reports released since the decision showed inflation slowed to the weakest pace in more than six months and industrial output shrank in March, prompting the statistics office to say that “nothing” suggests “a breakthrough” in the first quarter.
“While discussing the level of interest rates it was agreed that these should be kept unchanged at the present meeting, in particular amid ambiguous signs of a possible economic recovery in the subsequent quarters,” according to the document.
Some central bankers said a “relatively large” interest-rate disparity between Poland and advanced economies may encourage inflows of “portfolio capital.” This could lead to an “excessive” rise in government bond prices and increase “the macroeconomic risk” in the case of sudden outflows.
“A few” Council members believed more reductions in borrowing costs might limit the scale of restructuring of unprofitable companies, according to the minutes.
Other central bankers also argued that keeping real interest rates at “relatively high level” would boost deposit growth and help support the stability of the banking industry amid the debt crisis in the euro area, the document showed.
Governor Marek Belka used his tie-breaking vote to cut rates by 50 basis points to 3.25 percent in March, according to the voting tally released separately today by the central bank. None of the economists surveyed by Bloomberg had predicted the decision, which was also backed by Andrzej Bratkowski, Elzbieta Chojna-Duch, Anna Zielinska-Glebocka and Jerzy Hausner.