April 11, 2017 / 10:41 AM / 3 months ago

INTERVIEW-Polish central banker Sura says rates could stay on hold for another year

WARSAW, April 11 (Reuters) - Poland's central bank is likely to keep interest rates at current all-time lows until at least the end of the first quarter of 2018 if inflation stabilises below 2 percent in coming quarters, rate-setter Rafal Sura said.

If inflation doesn't stabilise and the central bank's new inflation forecast due in July reveals "negative tendencies" in consumer prices, then the bank might consider raising rates, but this looks less likely, he said.

"I trust that inflation will close (the year) at a level below 2 percent assuming that there are no external shocks or some domestic natural catastrophes that cause prices to rise," Sura told Reuters in an interview conducted last Wednesday for publication on Tuesday.

"If inflation stays within these limits ... if the economy grows at the expected pace, then I do not see grounds to raise interest rates this year and for sure also not in the first quarter of next year," he said.

The comments by Sura, who joined the 10-member rate-setting Monetary Policy Council (MPC) in November, support economists' expectations that interest rates will not change in the coming months.

Polish consumer prices were stable in November after falling for more than two years, and in February annual inflation hit 2.2 percent, pushing the inflation-adjusted interest rate into negative territory for the first time in five years.

In March inflation slowed to 2.0 percent.

The central bank has an inflation target of 2.5 percent, give or take one percentage point.

"We are analysing inflation processes, therefore the July inflation projection will be particularly important for us. It will show us the path of inflation in 2018 and 2019," Sura said.

"If indeed in the projection there are some negative tendencies in inflation, then this would a be premise to consider a decision to raise rates," he said.

The central bank has held the benchmark rate at a record low of 1.5 percent since a 50 basis point cut in March 2015.

"If we see inflation rising in a different manner than currently assumed - which is absolutely not indicated by the (current) projection - then this would be a reason to react appropriately early," Sura said. (Writing by Marcin Goettig; Editing by Susan Fenton)

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