WARSAW: Poland’s zloty may weaken further against the euro and the dollar, and a weak zloty is good for exports and the economy, the newly-appointed member of the central bank’s rate-setting panel Jerzy Kropiwnicki said.
“It is not a big worry for me that zloty will not be strengthening, because such a situation is beneficial for our exports,” he said.
The zloty has lost 5.5 percent against the euro since May, partly due to uncertainty over Poland’s economic policy.
The central bank kept interest rates at an all-time low of 1.50 percent last month and said it expected deflation, which has persisted for nearly two years, would continue in the coming months. The central bank will soon present its new inflation and economic growth forecasts that have been key to rate-setting panel decisions in the past.
Kropiwnicki said the new central bank projection would show that deflation would last longer than previously expected. But taking into account robust economic growth, there was no need to change rates, he said.
Kropiwnicki did not comment on the central bank’s outlook for Poland’s gross domestic product. He said in his personal view GDP growth would be maintained at 3.8-4.0 percent this year. Polish economic growth has hovered around 3.4-3.6 percent for the last two years.
Kropiwnicki reiterated that he saw no need to change rates, which have been at a record-low of 1.5 percent since March 2015. “I don’t see reasons that could change monetary policy prospects in the medium term.”
Asked if he would support a 50-basis points rate reduction if the zloty were to strengthen in response to future actions by the European Central Bank and if Poland’s growth slowed down, Kropiwnicki said: “Such prospect is so improbable, because there are elements of government policy which may indicate that the zloty will weaken. I’m talking about further consequences of the bank (asset) tax, and potential Swiss franc-denominated credits conversion.”
Poland’s ruling Law and Justice party (PiS), which won elections in October, has introduced a new tax on the country’s mostly foreign-owned banking sector. And President Andrzej Duda has proposed a conversion scheme to allow borrowers to redenominate their costly Swiss franc mortgages into zlotys.
Polish banks hold a combined $43 billion in foreign currency debt, mainly in Swiss francs, taken out when the franc was weaker and the loans were easier for Polish consumers to repay.
Analysts expect that bank tax, which came into effect this quarter, may limit lending growth, while presidential proposal to convert forex loans might weaken banks and the Polish currency.
Most of newly-appointed members of the central bank’s Monetary Policy Council, reshuffled by the PiS-led parliament and PiS-backed president have said they saw no need to change rates.
Kropiwnicki also said he saw no need for implementing non-standard monetary policy tools, which were suggested by PiS politicians during an election campaign.
“It is not a big worry for me that zloty will not be strengthening, because such a situation is beneficial for our exports,” he said.
The zloty has lost 5.5 percent against the euro since May, partly due to uncertainty over Poland’s economic policy.
The central bank kept interest rates at an all-time low of 1.50 percent last month and said it expected deflation, which has persisted for nearly two years, would continue in the coming months. The central bank will soon present its new inflation and economic growth forecasts that have been key to rate-setting panel decisions in the past.
Kropiwnicki said the new central bank projection would show that deflation would last longer than previously expected. But taking into account robust economic growth, there was no need to change rates, he said.
Kropiwnicki did not comment on the central bank’s outlook for Poland’s gross domestic product. He said in his personal view GDP growth would be maintained at 3.8-4.0 percent this year. Polish economic growth has hovered around 3.4-3.6 percent for the last two years.
Kropiwnicki reiterated that he saw no need to change rates, which have been at a record-low of 1.5 percent since March 2015. “I don’t see reasons that could change monetary policy prospects in the medium term.”
Asked if he would support a 50-basis points rate reduction if the zloty were to strengthen in response to future actions by the European Central Bank and if Poland’s growth slowed down, Kropiwnicki said: “Such prospect is so improbable, because there are elements of government policy which may indicate that the zloty will weaken. I’m talking about further consequences of the bank (asset) tax, and potential Swiss franc-denominated credits conversion.”
Poland’s ruling Law and Justice party (PiS), which won elections in October, has introduced a new tax on the country’s mostly foreign-owned banking sector. And President Andrzej Duda has proposed a conversion scheme to allow borrowers to redenominate their costly Swiss franc mortgages into zlotys.
Polish banks hold a combined $43 billion in foreign currency debt, mainly in Swiss francs, taken out when the franc was weaker and the loans were easier for Polish consumers to repay.
Analysts expect that bank tax, which came into effect this quarter, may limit lending growth, while presidential proposal to convert forex loans might weaken banks and the Polish currency.
Most of newly-appointed members of the central bank’s Monetary Policy Council, reshuffled by the PiS-led parliament and PiS-backed president have said they saw no need to change rates.
Kropiwnicki also said he saw no need for implementing non-standard monetary policy tools, which were suggested by PiS politicians during an election campaign.
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