(Bloomberg) — Polish borrowing costs are being kept near zero as record new cases of Covid-19 reignite concerns about the economic outlook.
While some central bankers have urged interest-rate increases to be considered next year, analysts see little chance of a move before then. The bank left its benchmark at a record-low 0.1% on Wednesday, as predicted by all analysts surveyed by Bloomberg.
Despite monthly data signaling the European Union’s biggest eastern economy saw an improvement last quarter, daily infections are now four times what they were in the spring, raising the prospect of restrictions being reimposed on businesses.
“The trajectory of virus development in Poland and in the world is still a powerful risk factor,” Mbank economists led by Marcin Mazurek said in a research note. “We won’t see interest-rate hikes in Poland until the economy accelerates and inflation rises above the target. This scenario is probably only for 2022.”
Markets agree, pricing in no change to the benchmark for at least a year and pushing yields on government debt toward zero. The zloty, meanwhile, has also slipped, losing 1.9% against the euro last quarter. That’s unlikely to worry the Monetary Policy Council, which has been pushing for a weaker currency to underpin the economic recovery.
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Central bank Governor Adam Glapinski has called the current benchmark “fair,” suggesting Poland won’t follow Hungary in raising rates. Uncertainty about the pandemic and slowing inflation mean monetary policy “has to remain accommodative,” he wrote in the Polish media after September’s rate meeting.
Others aren’t so relaxed. Monetary Policy Council members including Jerzy Kropiwnicki and Eugeniusz Gatnar warn of elevated growth in consumer prices, which rebounded last month. They also say there’s been little benefit from ultra-low interest rates when it comes to business investment, warranting a gradual return of the benchmark toward 1.5% next year.
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Speaking last week at a conference, former central banker Jerzy Hausner accused the 10-member MPC of supporting economic growth while neglecting to fight inflation. The bank’s virus response has been rolled out alongside 130 billion zloty ($34 billion) of fiscal support from the government.
Wednesday’s rate meeting was the seventh without a news conference. Investors will have to rely on a statement and minutes that will be published a month later.
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