June 8 (Bloomberg) -- The European Central Bank’s policy easing moves have the potential to strengthen the zloty, even as the currency’s reaction so far has been “very modest,” Polish central bank Governor Marek Belka said.
Mario Draghi unveiled an unprecedented round of measures last week to help the ECB’s record-low interest rates feed through to an economy threatened by deflation. Policy makers reduced the benchmark to a record low 0.15 percent and cut the deposit rate to minus 0.1 percent, becoming the first major central bank to take one of its main rates negative.
“What the ECB has announced and has introduced has a potential to strengthen the zloty, which is not good as it could slow down our exports, slow down our economy,” Belka said today in an interview in Amman, Jordan. “We have registered some strengthening of the zloty, but it is not anything that can complicate our life.”
Poland, which relies on the euro area for more than half of all its exports, will “only rejoice” if the ECB’s measures succeed, he said.
The zloty last week rallied to the strongest level against the euro since January 2013. It has appreciated 1.7 percent this quarter compared with a 1.5 percent gain for the Hungarian forint and little change for the Czech koruna.
A weaker exchange rate “is helpful” for the Polish economy, especially since inflation is “so close to zero,” Finance Minister Mateusz Szczurek said in an interview with Bloomberg TV on June 5. He said the ministry would like to see the consumer price index close to 2.5 percent and “strongly supports” the central bank in reaching this target. Inflation fell to 0.3 percent in April, the lowest in 10 months.
Belka last week put interest-rate cuts back on the agenda in Poland after he said the inflation rate may turn negative in “the summer months.” That signaled a shift in the position of policy makers, who left the benchmark seven-day reference rate at a record-low 2.5 percent for an 11th month.
Yet, the ECB measures alone didn’t alter the central bank’s stance, according to Belka.
“‘What happened last Thursday was entirely expected, so did not change our assessment of the situation,’’ he said.
While the probability of an interest-rate cut in Poland wasn’t zero, ‘‘this is not our basic scenario,’’ Belka said.