(Adds analyst comment, background)
By Anna Koper and Anna Wlodarczak-Semczuk
WARSAW, March 16 (Reuters) - The Polish central bank’s management board said on Monday it is starting large-scale purchases of treasury bonds on the secondary market, and called for cuts in interest rates and reserve requirements to combat the effects of coronavirus.
Poland has taken far-reaching steps to stop the virus, which killed has three and infected 156 in the country. It banned foreigners from entering the country, shut down schools and other public places, and capped public gatherings at 50 people.
The board’s statement followed calls on Friday by central bank governor Adam Glapinski for cuts in interest rates.
The central bank, however, has yet to act on borrowing costs, which have been kept at a record low of 1.5% since 2015.
The central bank has not said when its rate-setting panel, the Monetary Policy Council, may decide on rates. The MPC has a working meeting on Tuesday but it does not usually change the cost of credit at such gatherings. Normally it determines rates at decisive meetings that occur in the first week of the month.
“The spreading epidemic of coronavirus is a growing threat to public health and requires strong responses,” the central bank management board said in a statement on Monday.
Some analysts doubt that cutting rates would be the bank’s most effective move at a time when inflation remains high in Poland, well above the central bank’s target range. It reached 4.7% in February, its highest since November 2011.
“Cutting rates by 50 basis points will not help companies a lot and would be troublesome for banks and their financial results,” said Marcin Mrowiec, chief analyst at bank Pekao.
Most recent comments by the 10-member MPC suggest a rate cut may be on the cards soon. The panel votes on rate decisions but if the vote is split the governor decides.
In Monday’s statement, the bank’s board said it hopes its bond-buying operations would bolster the liquidity of the treasury market.
Economists said in doing so the bank will help the government increase budget spending at a time when the economy starts to feel pressure caused by the coronavirus outbreak.
“This is aimed at stabilizing long-term market interest rates,” Chief Economist at Credit Agricole Bank Poland Jakub Borowski said.
The central bank’s management board also recommended increasing the remuneration of holdings of required reserves, that will - analysts said - increase banks’ profits.
The central bank board also said that the government should consider reducing or eliminating a bank tax.
The Polish zloty extended the day’s losses after the release of the central bank’s statement. At 1703 GMT it was 1.45% down against euro at 4.4391 on the day.
A local political news website 300Polityka said that Poland’s Prime Minister Mateusz Morawiecki and the country’s President Andrzej were to meet on Monday evening to discuss proposals designed to boost the economy.
Reporting by Marcin Goclowski, Anna Koper, AGnieszka Barteczko, Anna Wlodarczak-Semczuk, Joanna Plucinska and Pawel Florkiewicz; editing by William Maclean