December 5, 2017 / 2:40 PM / a year ago

REFILE-UPDATE 2-Polish central bank governor reiterates stable rate signal despite CPI jump

(Amends headline to include “governor”)

* Central bank keeps key rate at 1.5 pct, as expected

* Governor reiterates rates to stay unchanged to end-2018

* Glapinski repeats his guidance despite jump in inflation

* Bank says it will cut required reserve rate from January

By Pawel Florkiewicz and Marcin Goettig

WARSAW, Dec 5 (Reuters) - Polish central bank governor Adam Glapinski reiterated that interest rates are likely to remain unchanged until the end of 2018 on Tuesday, despite last month’s unexpected inflation rise.

Following the bank’s decision to keep the key rate unchanged at a record low of 1.5 percent, Glapinski also said that a recent strengthening of the zloty currency was equivalent to a “significant” tightening of monetary policy.

“The data do not... change my stance,” Glapinski told a news conference. He has a casting vote in the 10-member Monetary Policy Council (MPC) and his stance has usually been echoed by the majority of rate-setters.

“I expect that until the end of 2018 interest rates will remain at their current level if the projection is close to reality,” he said, referring to the central bank’s forecasts for inflation and economic growth.

Glapinski’s comments come after inflation unexpectedly jumped to 2.5 percent in November - its highest level in 5 years and equal to the central bank’s target.

The central bank said in a statement that the main reasons behind the pick-up in consumer prices were higher prices food and energy prices, with underlying inflation pressure - or core inflation - remaining low.

The scale of monetary tightening priced in over the next 12 months, fell slightly after the rate decision. By 1707 GMT, about 30 basis points of tightening were fully priced in by early December next year.

This is in line with the expectations of analysts polled by Reuters, who expect the next 25-basis point hike in the last quarter of 2018.

Glapinski also said that the zloty’s recent strengthening was equivalent to a “significant” tightening.

The zloty has gained about 15 percent versus the dollar this year, making Polish exports less price competitive.

Divisions over future interest rates within the MPC have deepened in recent months, with a minority of rate-setters arguing the central bank should pre-emptively raise rates due to record low unemployment and to corporate wages growing at their fastest pace in years.

The governor said that the central bank’s decision to cut the required reserves rate to 0.5 percent from 1.35 percent from January was of a “technical character”.

Analysts have said the cut would reduce central bank costs - mirrored by a reduction in commercial banks’ profits - by about 350 million zlotys ($98.36 million) a year. ($1 = 3.5582 zlotys)

Reporting by Pawel Florkiewicz and Marcin Goettig; additional reporting by Pawel Sobczak and Bartosz Chmielewski; writing by Marcin Goettig; editing by Alexander Smith

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