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Poland’s four-year pause in record-low borrowing costs persisted as the central bank looks past rapid economic expansion and an uptick in inflation to focus on slower growth elsewhere in the world.
Recent debate over a potential interest-rate hike for Europe’s biggest eastern economy was limited to just words as the benchmark was kept at 1.5% on Wednesday, in line with analyst predictions.
“The Monetary Policy Council is now talking about holding rates steady until the end of most members’ term and -- given the overall environment, both global and local factors -- we concur,” economists at mBank SA said. “We don’t expect any rate changes in Poland in the foreseeable future, although the rise in inflation may generate some noise from Council members.”
Governor Adam Glapinski is the central bank’s most vocal dove, insisting repeatedly that interest rates won’t need to be raised for the next three years -- when the MPC’s current term finishes.
Despite faster inflation prompting some monetary-policy makers to openly discuss a hike further down the line, the market is similarly skeptical that one will materialize any time soon. Derivatives show a higher chance of a cut than an increase in the next year. The zloty has barely budged all year.
Regional peers such as the Czechs have tightened monetary policy and there are grounds to consider doing so in Poland too.
The European Union’s largest eastern economy grew 4.7% from a year earlier in the first quarter, more than estimated. It will get a further boost from a government looking to shore up support with $11 billion of election-year stimulus spending.
Inflation, meanwhile, is headed for a sustained period above the 2.5% goal target for the first time in seven years. Rate-setter Kamil Zubelewicz says consumer-price growth will exceed the target in 2019. The bank’s forecast from as recently as March was 1.7%.
But Glapinski has long advocated a softer stance, saying any upward inflationary pressure is under control. In the short term, a rate hike would be unpopular before the parliamentary vote in the fall.
--With assistance from Barbara Sladkowska.
To contact the reporters on this story: Dorota Bartyzel in Warsaw at firstname.lastname@example.org;Adrian Krajewski in Warsaw at email@example.com
To contact the editors responsible for this story: Andrea Dudik at firstname.lastname@example.org, Andrew Langley
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