Monetary council members divided over rate hike

Poland's inflation outlook is improving and the central bank could adopt a neutral bias for monetary policy in 2009, but there's conflicting opinions whether another interest rate hike is needed.

According to Marian Noga, a Monetary Policy Council member, interest rates could not be cut before 2010 since Poland is still in a tightening mode. The current interest rate is at 6 percent and Noga said that this rate is insufficient to bring inflation down, therefore he feels another rate hike is needed and soon.

"But if the inflation projection shows a lower inflation path and current inflation will ease…a move to a neutral bias in 2009 is possible," he said in an interview with Reuters.

Noga said that central bank's next inflation projection, which is due at the end of October, to show a significant decrease, but he does admit that the figures won't be low enough for a rate cut. "The economic situation and the inflation situation do not allow for a rate cut before 2010," he said.

He did, however, admit that the council is split on what to do on interest rates, as there are different views in today's difficult market situation.

However, another MPC member Jan Czekaj said that Poland doesn't need any more monetary tightening. "I believe that the situation is such that a rate hike is not needed immediately. I even wonder whether another hike will be needed at all," Czekaj told Reuters. (AO)

Source: Reuters