National Bank of Poland

Claire Jones

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ECB vote

The European Central Bank’s governing council decamps to Ljubljana next week for its October policy vote. This from the FT’s Frankfurt bureau chief Michael Steen on what to expect: Read more

Claire Jones

Our week ahead email will help you to track the most important events in the central banking world. To see all of our emails and alerts visit www.ft.com/nbe

Both the European Central Bank and the Bank of England will vote on monetary policy on Thursday.

The Monetary Policy Committee decision is out at noon local time (11.00 GMT). According to a Reuters poll, most expect the Bank to hold rates and maintain the stock of asset purchases at £200bn. However, a significant minority predict more QE, with most of these believing that £50bn is the amount that the MPC is most likely to plump for.

Though those expecting more QE in October are in the minority, the bulk of analysts do believe the Bank will expand its asset purchases at some point in the near future, with November considered the most likely option. The Bank also publishes the minutes of its FPC meeting on Monday at 09.30 local time (08.30 GMT), which may shed some light on the rather ambiguous statement that came out this week.   Read more

Claire Jones

Rate decisions

Next week sees a host of central banks vote on monetary policy.

The Reserve Bank of Australia’s board is expected to hold rates on Tuesday. On Wednesday Sweden’s Riksbank, the National Bank of Poland, the Bank of Japan and the Bank of Canada are all set to vote. Read more

Hawkish comments from Poland’s central bank have translated into a rate rise, a move largely expected by analysts. The quarter point rise leaves the key reference rate at 4 per cent.

Annual inflation was running at 3.3 per cent in the year to February, down from 3.5 per cent in the year to January but still above the Bank’s 2.5 per cent target. After many rumours to the contrary, rates were kept on hold at the last meeting though members did vote on a rate rise. Read more

Increasingly hawkish statements from Poland’s interest rate-setting Monetary Policy Council have analysts convinced that Poland is in for another rate hike on Tuesday as the central bank resumes its tightening policy.

The expectation is that the council will increase its policy rate by a quarter point to 4 per cent a year – with analysts at Danske Bank predicting that rates will continue their upward climb, hitting 5 per cent within 12 months.

Inflation expectations are on the rise. According to Citi Handlowy bank, they reached 3.9 per cent a year in March. The central bank has also expressed concern about the lacklustre performance of the zloty, which has been sagging on worries over Poland’s budget and the government’s unenthusiastic fiscal tightening programme.

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A rate rise was a serious option at the last meeting of Poland’s monetary policy committee. Minutes reveal that policymakers held a vote on a quarter point rate rise, but that the majority voted against it because of heightened doubt over growth, coupled with low drivers of aggregate demand (such as high unemployment and low wage pressure):

The majority … represented the view that recent data increased the uncertainty regarding economic growth… Further arguments in favour of this decision included the persistently high unemployment rate and modest wage pressures in the enterprise sector, both reducing the risk that heightened inflation, which up to now has resulted from factors beyond the direct influence of monetary policy, should persist. Furthermore, in the opinion of some Council members, NBP decisions on interest rates should take into account the monetary policy pursued by major central banks, in particular the European Central Bank.

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The zloty has fallen against the euro after Poland’s central bank decided to keep rates on hold. A large minority of analysts had expected a raise, following above-target inflation data, plus last month’s decision to increase rates 25bp, the first such move since the financial crisis. Signals from the Bank itself had been mixed.

(This paragraph is an update 1530 GMT) Comments from the central bank governor suggest this is a pause rather than a change of heart. “Some members of the Monetary Policy Council saw the January hike as the start of a cycle and I am one of them,” governor Marek Belka told a news conference. Read more

Disagreement seems to be a public affair at Poland’s central bank. Where other rate-setters cloak their positions or votes in secrecy, Poland’s 10-strong rate-setting council give their diverging views quite openly. This may well be a smart move.

Today, two opposing views were added to an almost exhaustive list of policymakers’ views. Anna Zielinska-Glebocka gave possibly the most hawkish assessment to date, warning of a race against time to beat rising core inflation. Asked by Reuters whether another rate hike may come as early as the MPC’s next sitting on March 1-2, Ms Zielinska-Glebocka said: “I wouldn’t want to say what we will do in March … It seems there is a need to tighten monetary policy. The depth of tightening will be decided by many factors.” Her bullish sentiments follow comments from Jerzy Hausner and Jan Winiecki, both concerned about inflation and eyeing further rate rises.

But balancing that view was Read more

Another rate rise is likely on March 15, after a member of the MPC said it would have to raise rates to combat a “wave of inflation” coming from abroad. Last month, Poland raised its key refinancing rate 25bp, its first increase since the crisis.

“Through trade, an inflation wave is reaching even here. There is no other way. The MPC (Monetary Policy Council) will have to raise interest rates,” Jerzy Hausner said in an article coauthored with Miroslaw Gronicki, a former finance minister, reports Reuters. Read more

*Updated 1509GMT

Interest rates will be a quarter of a point higher from tomorrow in Poland, after the MPC voted to increase them. The key refi rate will be 3.75 per cent. The move was expected, after bullish signals in December followed by strong hints from council members in the new year. Those comments suggested this would be the start of a rate normalisation policy, rather than a one-off reactive decision. All else equal, expect further rate rises ahead.

Headline inflation rose to 3.1 per cent in December, driven by higher energy prices. Initial estimates suggest core inflation rose, too. “The inflation rise,” said the Bank, “was accompanied by a rise in inflation expectations.”  This was given as the main reason for the rate rise in today’s news conference.

Governor Marek Belka has also said in recent months that he saw a decreased risk of strong capital inflows into Poland. Inflationary “hot money” inflows are encouraged by rate rises, which increase the return to investors. If those inflows are subsiding, Poland would be liberated to raise interest rates without fear of undue inflation.

Effective tomorrow, the 25bp rate rise will be the first Read more

It’s time for Poland to begin tightening – and we’re not talking a one-off rate rise, either. Central bank governor Marek Belka told Reuters today that it was time to begin a gradual monetary tightening cycle to help strengthen the zloty and cap inflationary expectations.

“The time for observing the situation in monetary policy is ending. I definitely believe that rates should be raised pre-emptively, not just in case,” Mr Belka told Reuters. Asked whether the rate rise could take place this month, Mr Belka replied: “If other “Irelands” happen then a rate hike would not achieve its goal and would not initiate zloty appreciation. For such a hike to initiate this process and be effective, it must take place at a time of stable markets.”

Mr Belka’s comments follow earlier hints, plus several bullish statements from colleagues on Poland’s monetary policy council. Read more

Hawkish comments from Poland’s central bank governor, following ambiguous data from the last minutes. The Bank kept its reference rate on hold at 3.5 per cent, as expected, but comments from Marek Belka suggest a rate rise is on the horizon.

Commenting on what he said was a decreased risk of strong capital inflows into Poland in the event of an interest rate rise, Reuters reports the governor telling a news conference: “This changes slightly the risk balance in favour of rate hikes or in favour of the start of a tightening cycle.” Mr Belka also reiterated his view that the Polish zloty has strong potential to appreciate. Read more

Poland’s latest minutes show something interesting, but we lack the information to interpret quite what. At the last rate-setting meeting, the Polish central bank held rates. Minutes just released showed that, as is now the norm, “some members” proposed a 50bp increase in the refinancing rate. This time, however, in addition, “some members” proposed a 25bp increase as well. This did not happen last time.

Minutes do not divulge who these members are, or even how many of them there are. Thus we cannot figure out whether one 50bp rate-rise proponent has softened their view, or whether all 50bp-rate-rise advocates stood firm, and someone who previously voted for a rate hold is now in favour of a rise. It’s a change, but whether it’s bullish or bearish compared to last month, we cannot tell. The most we can surmise is that at least two members of the ten-strong council are in favour of raising rates. Read more

Rates have been held today by Poland’s central bank, but some additional liquidity will be drained from the system by the decision to increase the amount of capital banks have to keep with the central bank. The reserve ratio will be increased from 3 to 3.5 per cent, the bank said, via Google translate.

No further information was given as the press conference hasn’t happened yet.

Poland’s central bank will aim to keep annual inflation as close as possible to its target of 2.5 per cent, rather than targeting a range of 2.5 per cent ± 1 per cent.

The shift in emphasis was mentioned in an assumptions document in the Bank’s 2011 Monetary Policy Guidelines. “Monetary policy is clearly targeted at keeping inflation closest to the 2.5 percent target rather than inside the wider range (of 1.5-3.5 per cent),” reads the document according to a Reuters translation. “This solution allows for the anchoring of inflation expectations,” says the document (via Google Translate), “[which] are not yet anchored sufficiently low.”

Polish news agency PAP reports, via Business WeekRead more

Minutes from Poland central bank show some MPC members favoured a rate rise at the August 24 meeting. A  motion to raise rates by 50bp was put to the vote and rejected; the refinancing rate remained at 3.5 per cent.
From the minutes:

While considering the decision on interest rates, some Council members argued that the present GDP growth, with a possibility of its acceleration and a likely reduced potential output growth, could contribute to a rise in inflationary pressure in the monetary policy transmission horizon. Those members emphasized that the current level of interest rates was adequate for a situation of strong slowdown in the growth of the Polish economy and the recession in its environment, and that given recovery gaining strength in Poland it was justified to increase the NBP interest rates. Read more

Slightly more bullish than last month: this is what we can glean from minutes just released of the Polish central bank’s June 30 meeting.

While the council settled on holding rates constant, this month “some members … indicated that interest rates in Poland were running at a level lower than the natural rate for the Polish economy. According to those Council members further economic recovery and a growing risk of inflation running above the NBP inflation targetmight speak in favour of raising the interest rates.” There was no mention of these bullish views in last month’s minutes.

The new head of Poland’s central bank says inflation could rise above 3.5 per cent, a percentage point above target. Dow Jones reports:

The Monetary Policy Council of the National Bank of Poland Wednesday dropped its informal neutral policy bias from its interest rate meeting statement and sees new upside risks for consumer price inflation, central bank Governor Marek Belka told a press conference Wednesday…. Read more

Poland’s government can expect tough scrutiny of its efforts to cut the budget deficit from Marek Belka, the country’s new central bank governor.

In an interview with the FT today, Belka says: “I will remind the government to keep its promises.” For Belka, a deficit hawk and a former Polish prime minister and finance minister, even the 3 per cent budget deficit target of the Polish government and many other European countries is not ambitious enough.

“We should not forget that the growth and stability pact talks about 3 per cent not as a goal but as a maximum,” he says. “The real goal is a balanced public sector budget over the economic cycle. Over the longer term we should be aiming at a surplus.”

For Belka, the model of fiscal probity is Germany, Read more

Former prime minister Marek Belka has been voted in as the new governor of Poland’s central bank, by a clear majority in the lower house (253 to 184). Mr Belka is a well-known international figure, serving as the IMF’s director for European Department since 2008. Prior to that he was under-secretary general at the UN and executive secretary of the UN Economic Commission for Europe.

Mr Belka replaces Sławomir Skrzypek, who was killed in the Polish air disaster in April, and his deputy Piotr Wiesiolek had been acting governor. Read more