WARSAW (Reuters) - Polish interest rates are at an adequate level, but they may be lowered if economic growth weakens, rate-setter Jerzy Hausner said.
The comments from Hausner, one of several swing voters on the 10-member Monetary Policy Council (MPC), suggest the bank is more likely to keep its main interest rate steady at a record low 2 percent at its next policy meeting on Dec.3.
Elzbieta Chojna-Duch, previously one of the most dovish members on the Council, recently also voiced opposition to further rate cuts.
“I believe the current level of interest rates is adequate,” Hausner told Reuters.
He said there was room to cut rates but that did not automatically mean the bank should cut them.
“I think that as long as we don’t see deflation starting to translate into weaker economic growth, we do not have to consider it as a sufficient reason to instantly react,” Hausner said.
The central bank kept its benchmark interest rate at 2 percent in November, confounding market expectations of another cut after a 50 basis point reduction in October and signaling that only weakening growth would prompt more easing.
“I am not ready to support a transition from the policy of moderate real (inflation-adjusted) interest rates to a policy of very low interest rates,” Hausner said.
He also said very low rates would risk sparking asset bubbles, as it did in the United States before the 2008 financial crisis.
“Most certainly if we were to lower rates further, we would enter the realm of zero interest rates and this rings an alarm bell for me,” Hausner said, referring to expected inflation-adjusted rates four quarters ahead.
“Our task is stabilization, not economic revival. We are supposed to reduce risk.”
Polish consumer prices fell at their steepest pace in more than three decades last month, driven by falling oil and food prices. But economic growth has been resilient, posting a better-than-expected 3.3 percent annual expansion in the third quarter.
The bank has cut interest rates by a cumulative 275 basis points since November 2012.
Central bank Governor Marek Belka said on Monday that he was worried the zloty EURPLN= will rise against the euro, a move that would hamper business and could affect interest rate policy.
Hausner, however, said of the current zloty exchange rate: “This is not an area which would currently require any consideration and I would consider potential action as superfluous.”
Hausner notably blocked monetary easing in October 2012, which was favored by Belka, a move seen as leading to a rift between the two.
Hausner declined to answer questions about his co-operation with Belka, who used expletives to describe Hausner and the MPC on tapes leaked in June.
Reporting by Marcin Goettig and Pawel Florkiewicz; Writing by Marcin Goettig; Editing by Susan Fenton