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Polish rate hikes possible in second half of 2021, central banker says

WARSAW, Nov 19 (Reuters) - Gradual rate-hikes would be possible in Poland in the second half of 2021, when inflation may exceed the upper limit of the central bank’s target range, rate-setter Jerzy Kropiwnicki told state-run news agency PAP in an interview published on Thursday.

Poland’s main interest rate is at a record low of 0.1%, after the central bank cut rates three times by a cumulative 140 basis points during the first wave of the coronavirus pandemic.

“We can see a number of factors, the combined impact of which may cause next year’s inflation to break 3.5%,” Kropiwnicki said, according to PAP.

“In such a scenario, it will be necessary to consider in the second half of 2021 whether or not to start gradual interest rate increases.”

Poland’s central bank targets inflation of 2.5% plus or minus one percentage point.

However, Kropiwnicki said he did not think the reference rate would return to 1.5%, where it had been before the pandemic struck, in 2021.

“In the longer term, however, it would be advisable to return the rates to such levels that have served us well over the last few years,” he said.

He said he saw no room for further rate cuts and was against the introduction of negative rates.

“I see no use for a negative rate in the Polish economy and I will not advocate for something like that,” he said. (Reporting by Alan Charlish, editing by Larry King)

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