Unmoved by Brexit, Poland Seeks to Keep Interest Rates Stable

  • Two central bankers see no need to amend rates after U.K. vote
  • Zloty leads declines in eastern Europe as Brexit hits markets

Polish policy makers intend to keep official borrowing costs on hold even as the U.K.’s decision to exit the European Union rattled financial markets on Friday, according to two members of the central bank’s rate-setting panel.

“At this moment, I don’t see the need to abandon our stance, which envisages keeping interest rates stable,” Monetary Policy Council member Marek Chrzanowski said in a phone interview on Friday. “Poland is fundamentally resilient enough to stabilize the markets.” The country’s central bank shouldn’t react to Brexit with any “nervous” decisions, fellow policy maker Grazyna Ancyparowicz told PAP news agency.

The National Bank of Poland has held its benchmark at 1.5 percent since March 2015, as the country’s economy expanded by at least 3 percent despite a record-long period of deflation. Poland led a selloff in emerging Europe, with the zloty sliding the most since 2011, as the U.K. vote to quit the EU threatened to throttle aid to the bloc’s less-affluent eastern member states and curtail trade with Britain.

While Poland is monitoring actions of the Bank of England and other major central banks amid increased aversion to risk, volatility on local markets should be temporary because Poland’s fundamentals are based on more than $100 billion in foreign-currency reserves and stable sources of external financing, Chrzanowski said. The country’s $545 billion economy shouldn’t suffer from the U.K.’s planned exit from the EU because it’s powered largely by domestic demand, he said.

For a story on market reaction to Brexit in east Europe, click here.

The central bank’s press service wasn’t immediately available to comment.

Zloty forward-rate agreements, derivatives used to bet on interest rates, show Poland keeping borrowing rates unchanged over the next 12 months, little changed by the outcome of the U.K’s referendum.

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