Polish bond yields declined to an eight-week low on speculation Zyta Gilowska’s successor on the central bank’s rate-setting panel will be more reluctant to tighten monetary policy in 2014.
The yields on two-year government bonds dropped four basis points, or 0.04 percentage point, to 3.01 percent at 4:47 p.m. in Warsaw, the lowest since Aug. 13. The zloty strengthened 0.2 percent to 4.1938 against the euro, extending its gain in the last three months to 2.6 percent, the best performance among 24 emerging-market currencies tracked by Bloomberg.
President Bronislaw Komorowski accepted Gilowska’s resignation from the 10-person Monetary Policy Council on Oct. 4 and has three months to select her replacement, according to Polish law. The policy panel has kept its benchmark rate at a record-low 2.5 percent at its last two meetings after cuts by a total of 225 basis points since November. Gilowska voted for one of eight rate cuts since November, the central bank’s website shows. She has missed at least five meetings since July 2012, including some because of health issues, according to voting records and comments from Governor Marek Belka.
“Gilowska was one of the most hawkish members of the MPC, so this change may potentially mean a tilt of balance of powers in the council toward more dovish monetary policy,” Bank Zachodni WBK SA economists, led by Maciej Reluga, wrote in a note today. “Theoretically, this can imply that rates may remain at the current all-time low level a bit longer.”
While policy makers repeated after a meeting last week that interest rates would be unchanged this year, Belka said in an interview on Sept. 27 that his views were close to those central bankers who see stable borrowing costs through at least the first half of 2014.
Komorowski “won’t rush” with replacing Gilowska, Tomasz Nalecz, the president’s adviser, said in a phone interview today. The president will seek legal opinion to clarify whether Gilowska’s successor will continue her term or whether it will be a new six-year term, Nalecz said.
A gradual economic recovery can restart the debate on interest rate cuts, fellow MPC member Elzbieta Chojna-Duch said in an interview for TVN CNBC today.
Former central bank Governor Hanna Gronkiewicz-Waltz, who’s facing a recall referendum as Warsaw mayor on Oct. 13, may be considered to fill the seat vacated by Gilowska, newspaper Rzeczpospolita reported today, citing a Warsaw official of ruling Civic Platform whom it didn’t name.