(Adds central banker quotes, analyst comment)
By Bartosz Chmielewski
WARSAW, Nov 8 (Reuters) - Poland’s central bank left its key interest rate unchanged at a record-low 1.5 percent on Wednesday, as the strengthening of the local currency offset the likelihood of rising inflation.
In an updated economic forecast, the central bank said it expected inflation to rise 1.6 to 2.9 percent in 2018, up from an earlier forecast of 1.1 to 2.9 percent. For 2019, it foresees an increase of 1.7 to 3.7 percent, up from 1.3 to 3.6 percent.
Even though the chances rose that inflation will exceed the bank’s target of 2.5 percent, central bank Governor Adam Glapinski reiterated that no change in rates would be needed until the end of 2018.
“There are some changes in data and expectations in the projection, but I do not change my mind ... It would be good to keep rates at the present level until the end of 2018,” he told a news conference.
“We do not plan this and we do not talk about it, but zloty appreciation was significant. This means a material monetary policy tightening,” Glapinski also said.
The Polish currency, the zloty, has gained 4 percent against the euro this year and strengthened more than 2 percent since late September. The Polish economy, fueled by welfare spending and the eurozone’s robust growth, expanded around 4 percent in recent quarters.
“The effect of the today’s sitting does not change our expectations regarding interest rates. Present MPC rhetoric remains mild, despite rising inflationary pressure,” Bank Millennium said in a report.
Glapinski also said the bank’s decision on Wednesday to cut the reserve requirement ratio to zero percent for deposits with a maturity of two years and longer was intended to encourage Poles to keep deposits in banks rather than move their savings into risky investments. (Reporting by Pawel Sobczak and Bartosz Chmielewski; Additional reporting by Sandor Peto; Writing by Marcin Goclowski; Editing by Larry King)