Three Polish central bankers signaled interest rates may remain at a record low into 2014 to help energize a sluggish recovery in the European Union’s largest eastern economy.
The 10-person Monetary Policy Council is “closer to extending” its pledge to keep borrowing costs at 2.5 percent until at least year-end, Governor Marek Belka told reporters today. The bank should leave its “neutral stance” for “one or two” quarters next year, fellow rate-setter Anna Zielinska-Glebocka said on the sidelines of a Warsaw banking conference.
Policy makers have kept borrowing costs unchanged after cutting them by 2.25 percentage points between November and July and Belka said this month that the economy is recovering “very gradually” from its worst slowdown in a decade. Gross domestic product rose 0.4 percent from the previous three months in the second quarter as the euro area, which buys 51 percent of Polish exports, emerged from a record-long recession.
The zloty rose 0.2 percent to 4.1659 per euro as of 4:58 p.m. in Warsaw. It’s lost 1.9 percent against the common currency this year, the fourth-best performance among 24 emerging-market currencies tracked by Bloomberg.
“Recent data bring us closer to extending the period during which our policy bias is neutral,” Belka said after his speech in Warsaw. “I don’t know when we’ll take that decision and for how long.”
Retail sales rose 3.9 percent from a year earlier last month, less than the median estimate in a Bloomberg survey of 29 economists, the Central Statistical Office reported today. Inflation slowed to 1 percent in September, according to an Oct. 15 report. Consumer price growth has stayed below the central bank’s 2.5 percent target for nine months.
Elzbieta Chojna-Duch, an MPC member who sought rate cuts as early as last July, told TVN CNBC today that policy makers may need to consider reducing borrowing costs again after they receive staff projections for inflation and economic growth next month. The economic recovery is proceeding “unusually slowly,” she said in an interview.
November’s projection will be key in deciding the central bank’s next “forward guidance” on interest rates, according to Zielinska-Glebocka, who opposes further cuts. GDP growth should accelerate to more than 2.5 percent in 2014, driven by Germany, she said.
Belka’s view doesn’t differ significantly from those MPC members who say rates should stay on hold until at least the middle of next year, the central bank governor said in an interview in New York on Sept. 27.
“There’s no doubt the recovery is under way,” Belka said today. “But it’s a slow one and it’s not creating inflation pressure.”