Polish Central Bank Will Keep Rates Unchanged, Survey

Polish Central Bank Will Keep Rates Unchanged, Survey

Poland's central bank will keep its benchmark interest rate unchanged as signs of an economic slowdown raise optimism that inflation will be curbed, a Bloomb erg survey of economists shows.

The Narodowy Bank Polski in Warsaw will leave the seven-day reference rate unchanged at 6 percent, after raising it four times this year, according to all 21 economists in a Bloomberg survey. A decision will be announced at about noon local time.

The Monetary Policy Council has been struggling for nine months to bring the inflation rate, at a four-year high of 4.6 percent June, down to its 2.5 percent target. Slower-than-expected employment growth, retail sales and industrial output in June indicate the economy is losing steam and inflation may finally slow, economists said.

``The Monetary Policy Council is likely to stress stronger than ever the risks related with weakening economic growth,'' said Jacek Wisniewski, the chief economist at Raiffeisen Bank Polska in Warsaw. ``The slowing growth makes us believe that chances for any further rate hikes this year are diminishing.''

Investors have scaled back expectations of further rate increases in Poland this year, futures trading showed. The forward-rate agreement used to gauge bets for the three-month Warsaw Interbank Offered Rate beginning three months from now dropped 20 basis points this month to 6.60 percent.

The economy expanded an annual 6.1 percent in the first quarter, slowing from 7.3 percent at the beginning of last year and 6.4 percent in the fourth quarter.

The 10.8 percent advance of the zloty against the euro, making it the world's second-best performing emerging market currency this year, has also helped to keep inflation from accelerating. The June inflation rate, at 4.6 percent in June, was driven mainly by a 3.3 percent monthly gain and an annual 7.5 percent advance in fuel prices, which policy makers cannot control.

Council member Jan Czekaj said on July 22 that there is no immediate need to change rates, while ``there is not much more that the central bank could do about inflation as it is generated by the factors that are outside of monetary policy makers' control.''

Economists said the central bank will no longer rely on the zloty as its chief weapon against inflation.

The zloty fell 0.2 percent to 3.2098 per euro yesterday. 

Other central bankers including Dariusz Filar, Halina Wasilewska-Trenkner and Marian Noga said rates must be lifted again as accelerating wage growth spurs consumer demand. Noga said on July 18 that wage growth would have to slow to below 6 percent from 12 percent in June to erase pressure on inflation.

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