July 2, 2014 / 5:15 PM / 3 years ago

UPDATE 1-Poland opens door to rate cut, but not in September

(Adds quotes, details)

* Rate-setters drop flat rate forward guidance

* But governor Belka says rate cut in September unlikely

* Sees economy expanding at steady pace ahead

* CPI may fall below zero in coming months

* Belka repeats will not resign because of leaked tapes (Adds quotes, details)

By Pawel Sobczak and Marcin Goettig

WARSAW, July 2 (Reuters) - Poland’s central bank dropped its commitment on Wednesday to keeping interest rates on hold at 2.5 percent until the end of the third quarter but said it was unlikely a cut would come as soon as September to lift flagging growth.

Its decision to drop the forward guidance had been widely expected, as Polish real interest rates are now among the highest in Europe and the economy, emerging Europe’s biggest, is seen at risk of tipping into deflation.

But markets had been expecting a firmer message on the timing of cuts from the central bank. Bond yields rose after the bank said a September cut was unlikely. The yield rise was a signal markets were trimming their bets for rate cuts ahead.

The rate-setting Monetary Policy Council (MPC) kept benchmark interest rates at their current record low of 2.50 percent, in line with analysts’ expectations.

Speaking to reporters about the removal of forward guidance from the MPC’s monthly statement, central bank governor Marek Belka said: “That obviously does not mean that one should expect rate cuts in September.”

“We view the likelihood of such a move as low, however it does mean that in the coming months we can expect all possible actions, depending on the economic situation.”

The bank said it had revised down its forecast for inflation over the next three years. It now sees inflation at about 0.3 percent in 2014 compared to 1.1 in the bank’s March projection.

The bank’s inflation target is 2.5 percent.

“In the opinion of the Council, in the coming months inflation will remain very low and may temporarily fall below zero,” the bank said in the statement.

It slightly raised its forecasts for economic growth this year, to 3.7 percent from 3.6 previously, despite a string of disappointing data in the last few weeks.

Ten-year bond yields and forward rate agreements rose by about 5 basis points after Belka’s comments.

Economists polled by Reuters are not expecting the bank to ease policy this year, whereas markets are pricing in 30 basis points of easing over the next five months.


Belka said he would not resign over leaked recordings of a private conversation he had with the interior minister that were published by news magazine Wprost in June, triggering a major political scandal.

In the recordings, the two men discussed how the central bank might help the government avoid election defeat and ways to put pressure on a businessman.

Both have said their comments were about hypothetical scenarios only and were taken out of context, and that they had not broken any law.

“I regret very much that public harm occurred as a result of my fateful conversation. I am very sorry with regards to my institution and my colleagues,” Belka said on Wednesday.

“I will try, together with the MPC, to rebuild the trust in relation to me personally, not the bank, which was badly dented.”

In the leaked conversation, Belka had used an expletive to describe the council and made derogatory remarks about one of its members, Jerzy Hausner.

Belka told the news conference that Hausner had attended Wednesday’s MPC meeting and had made a statement on the tapes affair which the rate-setter did not intend to make public.

The governor said there had been no suggestion that Hausner or any other rate-setter planned to resign from the council over Belka’s leaked remarks. (Reporting by Pawel Sobczak; Writing by Marcin Goclowski; Editing by Marcin Goettig and Catherine Evans)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below