Bratkowski Sees Polish Rates Stable Barring Zloty Surge

Only “unheard-of” zloty appreciation would convince Poland’s central bank to resume interest-rate cuts, policy maker Andrzej Bratkowski said.

The 10-member Monetary Policy Council pledged this month to keep borrowing costs unchanged until at least mid-2014 even as the central bank projects that inflation will continue to undershoot its 2.5 percent target through 2015. The European Central Bank unexpectedly cut rates on Nov. 7 and Czech policy makers began unlimited koruna sales to forestall deflation.

“In the context of recent decisions by the ECB and the Czech central bank, further interest rate cuts are effectively out of the question for us,” Bratkowski said in a Nov. 15 interview in Warsaw. “Unless we were dealing with some unheard-of appreciation of the zloty, for example beyond 3.8 per euro. At that level I’d start to get nervous.”

Policy makers led by Governor Marek Belka reduced rates by 2.25 percentage points between November and July to revive the European Union’s largest eastern economy. While growth accelerated to 1.9 percent in the third quarter, its fastest annual pace in more than a year, inflation slowed to 0.8 percent in October, the statistics office said last week.

Poland won’t cut interest rates even with low inflation and the country is “a long way from deflation,” Belka said in an interview today, published on, the website of a central bank news magazine.

The zloty advanced 0.3 percent to 4.1765 per euro at 3:23 p.m. in Warsaw, paring this year’s decline to 2.2 percent, the sixth-best performance among 24 emerging-market currencies tracked by Bloomberg.

Pushed Cuts

Bratkowski had been among the most vocal supporters of early rate cuts among Polish central bankers in 2012, when the economy began to slow. He was the first to seek a half-point reduction in July of that year, two months after the panel voted to increase borrowing costs, according to voting records on the National Bank of Poland’s website.

The central bank’s commitment to stable rates next year will more probably be “extended rather than shortened,” according to Bratkowski. While growth is recovering in Poland, there is “no space for quick improvement of the economic situation” in the euro area, the country’s biggest trading partner, he said.

German expansion slowed and France’s economy unexpectedly contracted in the third quarter. In eastern Europe, Czech GDP unexpectedly shrank between July and September, while Hungary and Romania accelerated.

Rush Job

Poland’s own rebound will “gradually gain steam” in the next two years even as the country’s growth rate remains below its “long-term averages,” the European Commission said this month in its latest forecast.

Once that recovery gathers momentum, policy makers will need to react, according to Bratkowski. That means the central bank’s practice since July of giving forward guidance on interest rates may be a “temporary” departure, he said.

“I believe that we should start raising interest rates in late 2014 or early 2015 so we won’t have to rush the job later,” Bratkowski said. “Preemptive and gradual moves should ensure” both the economy and financial markets will react “more calmly.”

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