INTERVIEW: Poland's central bank sees no need for easing, as ECB about to embark on it - governor

By bne IntelliNews June 4, 2014

WARSAW (IntelliNews) -- Poland’s central bank sees no need for loosening of monetary policy, even as it expects the European Central Bank (ECB) to take easing measures in June, National Bank of Poland (NBP) Governor Marek Belka told Capitol Intelligence/IntelliNews.

The ECB may make a symbolic cut to its already very low interest rate of 0.25% in June, Belka said. Inflation in the 18-country eurozone declined to 0.5% in May, well below the ECB’s 2% target, further fuelling fears of deflation.

Despite very low inflation in Poland, at just 0.3% in April, the NBP sees no threat of deflation, as accelerating growth will eventually lead to a build-up of inflationary pressures, a member of the Monetary Policy Council (MPC), the central bank’s rate-setting committee, said.

The Polish central bank will be interested to see how radical the ECB is in its easing measures, starting June, the MPC member said. One intriguing idea for the ECB would be to copy Denmark’s central bank in turning its interest rate on deposits negative, in effect charging banks for keeping money with the central bank.

Whatever steps the ECB takes, they are unlikely to have effect large enough to significantly impact the balance of risks to Polish growth and inflation, the MPC member said. The złoty may make some ground against the euro, but any gains are unlikely to be big enough to affect Poland’s trade balance with the eurozone, the recipient of over two-thirds of Polish exports.

The złoty now trades at 4.1530 to the euro, practically the same level as at the beginning of the year.

by Aleksander Nowacki in Warsaw

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