Poland May Delay New Rate Guidance Until May, Hausner SaysDorota Bartyzel
Poland’s central bank may avoid tipping its hand on future policy moves until May as inflation-free economic growth allows time to review the interest-rate outlook, central banker Jerzy Hausner said.
The rate-setting Monetary Policy Council said last month that new inflation and economic forecasts due from the central bank’s research staff in March may help policy makers indicate possible changes after their forward guidance for steady rates expires in June.
“It’s highly probable that our post-meeting statements in March and April won’t differ from previous months,” Hausner said in a Feb. 18 interview in Warsaw. “I wouldn’t be surprised if the March projections confirm the previous forecasts and show faster economic growth without any noticeable acceleration in inflation.”
The Narodowy Bank Polski, which has kept its seven-day reference rate unchanged at a record 2.5 percent for seven months, announced in November that borrowing costs should stay unchanged at least until mid-2014. Policy makers enjoy a “dream situation” as inflation is staying “under control” while the economy’s expansion accelerates, central bank Governor Marek Belka said Feb. 5.
The European Union’s largest eastern economy is forecast to almost double growth from last year’s 1.6 percent, according to the median estimate of 40 economists surveyed by Bloomberg.
The zloty traded at 4.1674 per euro at 3 p.m. in Warsaw, gaining less than 0.1 percent from yesterday and paring this week’s loss to 0.6 percent. The yield on the five-year government bond fell eight basis points to 3.78 percent.
With the central bank’s rate guidance expiring in June, policy makers should consider extending it in May, “logically by another half-year,” or inform markets that there’s a risk interest rates could rise, according to Hausner.
“Monetary tightening is somewhere out there on the horizon, most probably in the second half, although I’m not at all certain it will happen then,” he said. “The later we raise rates, the better, because that would help keep the economy on a relatively strong growth path.”
The economy will accelerate to about 4 percent growth in the final two quarters of 2014 and expand by 3.5 percent for the whole year, Hausner predicted. That would be faster than the country’s potential rate of expansion, though “not to a degree that would trigger inflation pressure,” he said. Hausner forecast a similar growth pace in 2015.
“That allows us to calmly prepare for the moment when the output gap closes and we have to make a preemptive adjustment in monetary policy,” Hausner said.
Hausner’s comments “seem far more dovish than previously,” Gabor Ambrus, an economist at 4CAST Ltd. in London, said today in an e-mailed note. The language “does indicate a shift in his stance and also gives a signal” about what policy makers may do in March, according to Ambrus.
In an interview with PAP on Jan. 20, Hausner said that Poland’s central bank is more likely to increase its benchmark rate in the second half than to keep it at a record low.
Rate decisions have been “consensus-based” in recent months, which bolsters the central bank’s credibility as a “predictable institution,” according to Hausner.
“I think the Council will seek ways to stick to that approach,” he said.
Policy makers have cut borrowing costs by 2.25 percentage points since November 2012, helping the Polish economy to accelerate for three consecutive quarters. Expansion reached 2.7 percent in the fourth quarter from a year earlier, the strongest rate since the first three months in 2012, though less than predicted in a Bloomberg survey.
Job growth at companies employing more than nine workers was zero in January, interrupting a two-month advance. Inflation last month was unchanged at 0.7 percent from a year earlier and has remained below the central bank’s tolerance range of 1.5 percent to 3.5 percent since December 2012.
Next month’s inflation and growth projections won’t alter “the council’s assumptions in any fundamental way,” Andrzej Bratkowski, a colleague of Hausner on the 10-member rate panel, said in a Feb. 17 interview.
“In any case, it’s certain to be a long time before we see inflation at levels requiring a quick rate increase,” Bratkowski said.
The central bank’s inflation outlook published in November shows annual growth in consumer prices may stay below the 2.5 percent target through 2015.
“Since the economy is expanding, monetary tightening is inevitable. When it will happen, however, nobody knows,” Hausner said. “We’ll take our time discussing new language because it may no longer be possible to provide forward guidance. We definitely won’t surprise the market.”