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'Safe haven' Poland to enjoy stable rates until at least 2019: central bank head

EconomyMay 16, 2018 01:20PM ET
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© Reuters. Poland's central bank governor-designate Glapinski speaks during a hearing at a parliamentary panel at the Parliament in Warsaw

By Pawel Florkiewicz and Marcin Goettig

WARSAW (Reuters) - Polish interest rates are likely to remain on hold until the end of 2019 and possibly longer as the country enjoys moderate inflation and can be seen as a safe haven amid global turbulence, central bank Governor Adam Glapinski said.

Speaking after the bank kept its benchmark rate at a record low of 1.5 percent, Glapinski said he was not worried about the weakening of the zloty .

"It seems to me that until the end of this year and throughout next year - and perhaps longer - there will be no reason to change the level of interest rates," Glapinski told a news conference.

"It seems to me that this will be the stance of the majority," Glapinski said, adding that he himself could envisage rates remaining stable in 2020 as well, unless there were some unexpected events.

The central bank has kept rates unchanged since a cut in March 2015. Poland's economy expanded a stronger-than-expected 5.1 percent year-on-year in the first quarter, while inflation stood at 1.6 percent in April.

The central bank targets an inflation rate of 2.5 percent.

Glapinski said the dollar has "wildly strengthened" due to the inflow of capital into the United States, causing a very difficult situation in South America, which has debt denominated in dollars.

"But we are not affected by this in any such way that we would feel a negative impact," the governor said, apparently referring to Argentina where the central bank raised its policy rate to 40 percent to avert a drop in the peso.

The zloty has weakened 7.5 percent versus the dollar since mid-April to a six-month low of 3.63. Most of Poland's public debt, equivalent to about 50 percent of GDP, is denominated in zlotys.

"Poland is indeed such an area of predictability, stability (...), which positively sets us apart (from other countries)" the Polish governor said.

"However, we are in this emerging market basket and we sometimes suffer because sometimes the pricing of risk of other countries, for example Turkey, is suddenly changing," he said. "But we, as Poland, our finances, are a sort of safe haven."

Turkey's record-low lira was among a host of heavyweight emerging market currencies pinned to the canvas on Wednesday after the dollar put on another show of strength.

'Safe haven' Poland to enjoy stable rates until at least 2019: central bank head
 

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