Poland's Record-Low Rates to Survive Price Shock




  • In Business
  • 2021-04-07 14:45:02Z
  • By Bloomberg

(Bloomberg) --

Poland kept borrowing costs at a record low, judging that threats to the economy from tighter Covid-19 restrictions outweigh a spike in inflation and a weaker national currency.

Despite surging price growth prompting nearby Russia and Ukraine to hike interest rates, the central bank in Warsaw left its benchmark at 0.1% for an 11th straight month on Wednesday -- as predicted by all economists surveyed by Bloomberg.

The pandemic remains the driving force as a third wave sweeping Europe brings record daily new cases in Poland. After suffering less than their western neighbors during as the coronavirus first appeared last year, the continent's east has become the planet's most-deadly region on a per-capita basis this time around.

"Available data indicate that the coming quarters will see a recovery of economic activity, although the scale and pace of the recovery are uncertain," the central bank said in a statement. "The further course of the pandemic and its impact on the economic situation in Poland and abroad continue to be the main source of uncertainty."

As regards inflation, which hit a six-month high in March, the bank sees price growth accelerating further in the coming months on fuel prices, before slowing as the government's vaccination program ramps up and the pandemic fades to "ease the impact of supply-side factors."

Of more concern is the damage being wrought by the virus on the European Union's biggest eastern economy, which shrank for the first time in nearly three decades in 2020.

Central-bank projections published last month envisage 4.1% growth this year as ultra-low rates are complimented by quantitative easing and 300 billion zloty ($77 billion) in fiscal stimulus from the government. But MPC member Jerzy Kropiwnicki said last week in a blog post that lockdown measures are "significantly weakening hopes" for a recovery in the coming months.

"The economy will rebound positively in the second half of the year," he wrote, forecasting a full-year number of 3% to 3.5%.

The zloty -- the second-worst-performing emerging-market currency in March -- could help by making exporters' goods more attractive. The central bank had long being calling for a weaker currency, repeatedly warning that its earlier strength was a threat to faster economic expansion and intervening to weaken it in December.

The bank reiterated Wednesday that it stands ready to intervene again, saying the pace of recovery will depend on foreign-exchange developments. After the currency slid to a 12-year low against the euro last month, the bank softened earlier wording that talked about the lack of a durable zloty adjustment hindering economic growth.

More clarity may come from Governor Adam Glapinski, who'll hold an online news conference Friday at 3 p.m. Warsaw time.

(Updates with central bank statement starting in fourth paragraph.)

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2021 Bloomberg L.P.

COMMENTS

More Related News

DiaSorin to Buy Covid-19 Test-Maker Luminex for $1.8 Billion
DiaSorin to Buy Covid-19 Test-Maker Luminex for $1.8 Billion

(Bloomberg) -- Italian diagnostics company DiaSorin SpA agreed to acquire Luminex Corp. for about $1.8 billion, gaining the maker of Covid-19 testing kits...

Peru Votes for President After Months of Chaos and Scandal
Peru Votes for President After Months of Chaos and Scandal

(Bloomberg) -- Peruvians are voting for president and congress in a crowded election that will determine whether the nation can restore order after recent...

Powell Says Economy Poised for Stronger Growth, Virus a Risk
Powell Says Economy Poised for Stronger Growth, Virus a Risk

(Bloomberg) -- Federal Reserve Chair Jerome Powell said the U.S. economy was at an "inflection point" with stronger growth and hiring ahead thanks to rising ...

South Korean Premier in Iran for Talks Over Frozen Oil Funds
South Korean Premier in Iran for Talks Over Frozen Oil Funds

(Bloomberg) -- South Korea's prime minister arrived in Tehran for talks over $7 billion of Iranian funds trapped in his country by U.S. sanctions, with a...

Most Mideast Stocks Rise With Earnings in Spotlight: Inside EM
Most Mideast Stocks Rise With Earnings in Spotlight: Inside EM

(Bloomberg) -- Most equities markets in the Middle East advanced on Sunday, with investors focusing on first-quarter earnings as reporting season picks...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business