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UPDATE 1-Polish rate-setters rejected cuts in September but expect them soon
September 18, 2014 / 1:47 PM / 3 years ago

UPDATE 1-Polish rate-setters rejected cuts in September but expect them soon

* Most central bankers see easing as justified soon

* Next meeting on Oct. 7-8 (Adds details, background)

WARSAW, Sept 18 (Reuters) - The Polish central bank’s policymakers rejected motions to lower interest rates by 25 and by 50 basis points in September, with a majority saying rate cuts were justified but should come later.

Their views are likely to strengthen expectations that rates - already at a record-low 2.5 percent - will be cut when the council meets on Oct. 7-8. The details of the votes were disclosed in the minutes of the Monetary Policy Council’s Sept. 2-3 meeting, which were released on Thursday.

“The majority of Council members assessed that in the near future it would probably be justified to adjust the level of NBP (National Bank of Poland) interest rates,” the minutes said.

The bank said before the September meeting it would start cutting rates if new data confirmed the economy - eastern Europe’s largest - was weakening and inflation was holding below the bank’s 2.5 percent target. Since then, data have showed industrial output fell by the fastest since March 2013 and deflation accelerated in August.

Economists say the threat of a slowdown stems from the uncertain recovery in the euro zone, Poland’s biggest trading partners. The conflict in Ukraine and the trade sanctions that have resulted from it are aggravating the threat.

The minutes said the policymakers felt that “signs of economic slowdown in Poland and abroad, an absence of price pressure and increased risk of inflation remaining below the target in the medium term, as well as monetary policy easing in the euro area, are factors in favour of lowering interest rates.”

Two of the most dovish rate setters, Elzbieta Chojna-Duch and Jerzy Osiatynski, said they would support a cut larger than 25 basis points in October.

However, Anna Zielinska-Glebocka, whose opinion is likely to be more representative of the majority on the MPC, said she may opt for a 25-basis-point move in October and another in November.

Thursday’s minutes also showed that some of the Council members believed that rates should already have been cut.

Forward rate agreements are currently pricing in that the whole Polish easing cycle will amount to about 90 basis points over the next 6-7 months. (Reporting by Marcin Goettig and Marcin Goclowski; Editing by Larry King)

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