There is still room for lowering Poland’s benchmark interest rate, Finance Minister Jacek Rostowski said during a budget debate in the Senate. Over the last six months, Poland had the second-highest interest rates in the EU, he said, and this was an additional burden that inhibited growth in the country’s economy.
Source: National Bank of Poland
The room for interest rate cuts comes from the lowering of Poland’s structural deficit by over 4 percentage points in 2010-2012, Mr Rostowski explained. “But unfortunately the Monetary Policy Council (RPP) did not take on a more accommodative, a more expansive policy in the autumn of 2012 and in 2013,” he added.
Despite Mr Rostowski’s arguments for lowering interest rates, members of the National Bank of Poland’s Monetary Policy Council were unanimous in the opinion that interest rates should remain flat at least until the end of this year, according to the minutes of the RPP’s September sitting.
“In the opinion of the Council, the level of interest rates in the longer run would depend on the scale and structure of recovery and the resulting inflationary pressure,” the statement said. No motions to change interest rates were put forward at the sitting.
The RPP left the NBP’s benchmark interest rate at 2.50 percent, the lombard rate at 4.00 percent, the deposit rate at 1.00 percent and the rediscount rate at 2.75 percent.
Too many uncertainties
RPP member Jerzy Hausner told the Polish Press Agency that interest rates will most likely remain flat in H1 2014 and possibly later next year. However there are “too many uncertainties” to make projections about the situation in H2 2014. “The expectation that the current level of interest rates will also hold throughout a certain portion of 2014 is reasonable. What portion that will be will depend on the strength of the economic recovery,” Mr Hausner said.
Another rate setter, Andrzej Bratkowski, also said that the council is unlikely to raise interest rates until the second half of 2014, unless the economic rebound is more rapid than expected. The central banker added that rate increases are more probable in Q4 than Q3 2014. The RPP may start thinking of higher rates when GDP growth exceeds 3 percent, he said.
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