WARSAW (Reuters) - The Polish central bank’s Monetary Policy Council should lower borrowing costs now to limit the economic impact of the coronavirus outbreak, the bank’s governor said on Friday.
Adam Glapinski said there were no liquidity problems in the Polish banking sector, but the central bank was monitoring the situation and was ready to take action.
“In my opinion, the Monetary Policy Council should support the economy by cutting interest rates already now,” he said in a statement published on the bank’s website.
The next regular meeting of the council is in April.
One MPC member, Grazyna Ancyparowicz, told Reuters the panel holds a working meeting on March 17 when it could discuss proposals from Glapinski. It was not immediately clear whether the council would move on interest rates at that meeting.
The central bank was not immediately available to comment.
“A cut in rates will immediately and directly lower credit costs,” the governor said, adding that “banks should allow borrowers to delay payments if their income declines.”
Glapinski said he expected inflation to decline in coming quarters, falling below current expectations.
Driven in part by rising food and energy prices, Polish inflation rose to its highest level since November 2011 in February. Borrowing costs have been at a record low of 1.5% for five years.
“A decline in demand for services and non-food goods and a strong decline in commodity prices will mean that inflation will fall,” Glapinski said.
Fiscal policy should also react, Glapinski said. “I am certain that the goal of fiscal policy, same as with monetary policy, should be to ease the effects of economic losses linked to the outbreak.”
Glapinski had been saying in recent months that rates should be held steady, despite fast economic growth and high inflation. Dovish MPC members outvoted hawks in January, the last meeting for which voting records are available.
One hawkish member, Kamil Zubelewicz, said on Friday that rate cuts would “fuel panic and encourage people to take their savings out of the banking system.”
Responding to the governor’s comments, Zubelewicz said a rate cut “would not calm the situation or lead people to borrow more.”
Three members of the bank’s 10-strong council — Lukasz Hardt, Jerzy Kropiwnicki and Eugeniusz Gatnar — shared Zubelewicz opinion, according to state-run news agency PAP.
Four others — Cezary Kochalski, Rafal Sura, Jerzy Zyzynski and Eryk Lon — signaled to PAP they could support a cut.
“The situation is extraordinary and requires fast and decisive actions,” Kochalski said, PAP reported on Friday.
The panel votes on rate decisions, if there is no majority then the governor has the casting vote.
Reporting by Justyna Pawlak, Anna Wlodarczak-Semczuk and Pawel Florkiewicz; Additional reporting by Agnieszka Barteczko; Editing by Leslie Adler and Alex Richardson