November 7, 2018 / 4:42 PM / 8 months ago

UPDATE 1-Polish head: rates likely to stay flat through 2019

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WARSAW, Nov 7 (Reuters) - Poland’s central bank governor Adam Glapinski said on Wednesday interest rates should remain unchanged until the end of 2019, or possibly longer, despite the bank’s latest forecasts that show an acceleration in inflation due to rising power prices.

Earlier the bank decided to keep rates at a record low of 1.5 percent.

“I do not see reasons to change rates until the end of 2019. If no new elements come up this would also apply to 2020”, Glapinski said during a news conference.

After he spoke, Polish government bond yields extended their rise. The 10-year yield traded at 3.22 percent late in the session, up by 5 basis points from Tuesday.

The bank also published its latest inflation report showing that inflation would come in at 2.6-3.9 percent next year, up from a previous estimated range of 1.9-3.5 percent, due to an expected rise in power prices.

“We do not know how it is with these electricity prices, what decisions will be taken here,” Glapinski said.

Polish energy market regulator URE has urged state-run utility companies to submit by mid November their expectations for household power prices for next year, it said on Tuesday.

The utilities’ plans for 2019 tariffs became a politically sensitive issue ahead of Poland’s local elections last month.

Energy Minister Krzysztof Tchorzewski said then that power prices for households would not change, while the head of URE signalled that a hike would be justified given surging carbon and coal prices and rising wholesale power prices.

Polish Power Exchange reports show that the monthly base price of 1 MWh in Poland increased by 42 percent year-on-year in October to EUR 57.67. (Reporting by Pawel Sobczak, Alicja Ptak and Sandor Peto; Writing by Agnieszka Barteczko; Editing by Marcin Goclowski and Gareth Jones)

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