March 4, 2020 / 4:42 PM / a month ago

UPDATE 1-Polish central bank governor sees stable rates despite coronavirus

(Adds background, details)

By Alicja Ptak

WARSAW, March 4 (Reuters) - Poland’s central bank governor Adam Glapinski said on Wednesday that interest rates will remain stable, and the Monetary Policy Council (MPC) will react calmly in the face of a mounting threat to the global economy from the coronavirus.

Glapinski was speaking after the central bank kept its benchmark interest rate unchanged at 1.5%, maintaining its wait-and-see approach despite rate cuts in the United States and other major economies.

“I can still say that these rates will remain stable if the projection is fulfilled: if one-off supply factors die off, regulated prices stabilise and there are no unexpected situations,” Glapinski told news conference.

Caught between accelerating inflation and slowing growth at home and in major economies, the MPC has opted to leave the cost of borrowing unchanged. Poland’s benchmark interest rate has been stable since the bank ended an easing cycle in 2015.

On Wednesday, Poland’s central bank increased its inflation forecast for 2020 to 3.1% to 4.2% from a previously expected 2.1% to 3.6% and cut the economic growth forecast rate to 2.5% to 3.9% this year from 2.7% to 4.4%.

Poland reported its first case of coronavirus on Wednesday. The scale of the potential hit to the global economy from the epidemic has forced rate-setters around the world to react.

On Tuesday Fed policymakers unanimously decided to cut rates by a half percentage point to a target range of 1.00% to 1.25%, with Australia also cutting its benchmark interest rate to a record low. The Bank of Japan has stressed its readiness to take “appropriate action”.

On Wednesday, the Bank of Canada slashed its benchmark interest rate to 1.25% from 1.75%.

Glapinski said the bank had tools at its disposal to deal with a serious coronavirus crisis, but said he did not expect serious consequences.

“We are ready... to act in cooperation with the government. I don’t think it will be necessary. Personally, I don’t think coronavirus will bring such (bad) results,” he said.

While saying that stable rates were best for the country, Glapinski said that if there is a change it will be a cut. (Reporting by Alicja Ptak; Writing by Marcin Goclowski and Alan Charlish; Editing by Lisa Shumaker)

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