Poland Can Plot Rate Moves Later as Inflation Stays Low

Poland’s central bank has plenty of time to plot its next move after pledging to keep borrowing costs at a record low until mid-2014 as the economy recovers without stoking inflation pressure, Governor Marek Belka said.

The Warsaw-based Narodowy Bank Polski held its seven-day reference rate at 2.5 percent for a seventh month, as predicted by all 40 economists in a Bloomberg survey. In today’s post-meeting statement, policy makers repeated that they plan no changes through at least June as demand, wage and cost pressures remain “low.”

While the European Union’s largest eastern economy expanded faster than anticipated in 2013, it still grew the least in four years, preliminary gross domestic product figures published last week showed. Inflation remained below the central bank’s 2.5 percent target for 13th month in December.

“I don’t see any reason for nervous moves,” Belka told reporters at a news conference in Warsaw. “We’re in a dream situation where economic growth is accelerating while inflation remains under control.”

New inflation and GDP forecasts next month from the central bank’s research staff should “shed more light” on how the economic situation is going to develop, allowing rate setters to consider their next steps, Belka said.

March Review

Policy makers may decide to flag a future rate increase or extend their “steady-rate guidance” after reviewing the March staff projections, central banker Jerzy Hausner told PAP news service in a Jan. 20 interview. Economists predict the pace of growth may almost double this year, emerging from the worst slowdown since 2009.

“The central bank should be under little pressure to tighten policy,” William Jackson, an economist at London-based Capital Economics Ltd, said today by e-mail. “The economy is unlikely to use up under-utilized resources, unemployed workers and spare capacity in manufacturing, particularly quickly.”

A preliminary estimate suggests fourth-quarter growth, to be released on Feb. 14, may have been as fast as 2.9 percent, Finance Minister Mateusz Szczurek said today in Warsaw. Economy expanded by 1.6 percent in 2013.

‘More Visible’

“Acceleration could be even more visible in subsequent quarters on growing private consumption and investment,” Jaroslaw Janecki, chief economist at Societe Generale SA in Warsaw, said yesterday by phone. “Economic recovery will shape decisions of policy makers in the second half of the year, when rate increases will begin.”

He predicts the central bank will make two quarter-point rate increases as economic growth may exceed 3.5 percent in the second half.

The zloty traded at 4.1894 per euro at 5:32 p.m. in Warsaw, strengthening 0.4 percent from yesterday and rallying for a third day after January’s 2.4 percent decline, the worst monthly performance since June. The yield on Poland’s five-year government bond fell nine basis points, or 0.09 percentage point, to 3.89 percent, reversing January’s 46 point increase.

The zloty’s weakening wasn’t “excessive” and appears “temporary,” Belka said today. “We have to monitor the situation, but I don’t think we will have to act because our economy is extremely well-balanced.”

Poland’s purchasing managers index, a gauge of manufacturing, surged to a three-year high of 55.4 in January, according to a Markit Economics survey for HSBC published on Feb. 3. Even as new orders accelerated and job creation rose at the fastest pace since the survey began in June 1998, the manufacturing rebound isn’t spurring inflation, HSBC economist Agata Urbanska-Giner said.

Inflation, which accelerated to 0.7 percent from a year earlier in December, won’t reach the central bank’s target before the end of 2015, according to Narodowy Bank Polski’s latest inflation report from November.

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