Polish rate setter Kotecki says scope for further rate hikes is limited

Security men at the Polish central bank headquarters guard piles of cash worth 1 million zlotys each ($248,000) in 100-zloty, 200-zloty and 500-zloty banknotes in Warsaw, Poland February 10, 2017. REUTERS/Marcin Goettig

WARSAW, Aug 31 (Reuters) - Polish rate-setter Ludwik Kotecki said on Wednesday he feared that inflation could become an even bigger problem over time but that the scope for further rate hikes was limited due to an expected economic slowdown.

The Polish central bank raised its main interest rate by a total of 640 basis points over the last year to 6.50% in July.

"We need to take into account that the scope (for rate hikes) may become smaller. We cannot cause a catastrophe for borrowers or credit institutions," Kotecki told private broadcaster TVN 24.

Asked if he expects another rate hike cycle, he said "no".

"I believe the (main) rate is at quite a high level, and on the other hand if macroeconomic projections (showing) a strong or very strong economic slowdown are confirmed then in such a stagflationary situation ... rates cannot rise much."

Polish central bank governor Adam Glapinski said in an interview with Business Insider Polska this week that inflation may increase further in August, but the pace of price growth may soon slow down and limited rate hikes are still possible.

Reporting by Anna Wlodarczak-Semczuk and Pawel Florkiewicz; Editing by Emelia Sithole-Matarise

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