Poland keeps rate at record low as pol­icy coun­cil changes loom

The Pak Banker - - COMPANIES/BOSS -

Poland left its bench­mark in­ter­est rate at a record low af­ter eco­nomic growth ac­cel­er­ated to a four-year high, prices fell for an 18th month, and the cen­tral bank con­tin­ued with the sched­uled re­place­ment of most of its de­ci­sion-mak­ing board.

The Mon­e­tary Pol­icy Coun­cil, led by Gov­er­nor Marek Belka, kept the sev­en­day ref­er­ence rate at 1.5 per­cent on Wed­nes­day, match­ing the pre­dic­tions of all 36 econ­o­mists in a Bloomberg sur­vey. While the coun­cil has kept the cost of bor­row­ing un­changed since March of last year, Pol­ish mon­e­tary pol­icy is now fac­ing both fis­cal changes ad­vo­cated by the three-month old Law & Jus­tice govern­ment as well as the ex­pir­ing terms of eight of the 10-mem­ber rate-set­ting board. This co­in­cides with an 18month bout of fall­ing prices and Belka, whose six-year term ends in June, said the bank's in­fla­tion pro­jec­tion next month will lag its pre­vi­ous fore­cast.

"We don't ex­pect im­me­di­ate changes in mon­e­tary pol­icy, a bit softer tone may be in the cards, though," Ernest Pyt­lar­czyk, chief econ­o­mist at MBank SA, said in an e-mailed com­ment be­fore the de­ci­sion. He still sees a pos­si­bil­ity of a rate cut this year as the newly elected mem­bers of the coun­cil "will be more re­spon­sive to low in­fla­tion and govern­ment fi­nanc­ing costs."

Three new mem­bers joined the coun­cil this month, and five oth­ers will fol­low in March. All the new mem­bers will be ap­pointed by ei­ther the rul­ing Law & Jus­tice Party, which took con­trol of Poland's two houses of par­lia­ment af­ter Oc­to­ber elec­tions, or by for­mer party mem­ber Pres­i­dent An­drzej Duda. The process, while sched­uled for this year, has raised con­cerns about the cen­tral bank's in­de­pen­dence af­ter Law & Jus­tice re­vamped the con­sti­tu­tional court and pub­lic broad­caster in changes that some Euro­pean Union gov­ern­ments crit­i­cized as un­der­min­ing demo­cratic checks and bal­ances.

The zloty traded 0.1 per­cent stronger at 4.4007 to the euro at 12:37 p.m. af­ter the first-ever sov­er­eign down­grade by Stan­dard & Poor's last month spurred a sell­off that sent the cur­rency to a four-year low above 4.50 last month.

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