Bloomberg News

Belka Says Poland Shouldn’t ‘Tighten Too Much’ on Inflation

October 17, 2011

(Updates with Belka comment in second paragraph.)

Oct. 17 (Bloomberg) -- Poland’s central bank shouldn’t “tighten too much” in response to inflation, while keeping its policies oriented toward maintaining stability in a global economic crisis, Governor Marek Belka said.

“We need to combat inflation, but not overdo it,” Belka wrote in an article for Bloomberg Businessweek Polska, published today. “We shouldn’t tighten the screws too far just to loosen them too much a short while later.”

Poland’s central bank is weighing a slowing economy against near decade-high inflation. Gross domestic product, which expanded 4.3 percent from a year earlier in the second quarter, may grow 3.8 percent in 2011, according to the International Monetary Fund.

Policy makers left the benchmark seven-day reference rate unchanged this month at 4.5 percent after raising borrowing costs by 1 percentage point in 2011 in an effort to bring inflation toward their 2.5 percent target. Consumer-price growth reached 5 percent in May, the highest in almost 10 years, before easing to 3.9 percent in September.

Rate Cuts Unlikely

Members of the rate-setting Monetary Policy Council including Anna Zielinska-Glebocka and Zyta Gilowska have said it’s too early to reduce borrowing costs, even as Poland’s biggest trading partners grapple with the euro area’s sovereign- debt crisis.

“Inflation isn’t slowing enough to start talking about an interest-rate cut,” Gilowska said in an Oct. 11 interview. “Expectations for one are definitely premature and their likelihood hasn’t increased an iota since August.”

Investors have canceled bets on lower rates after the zloty fell 10 percent against the euro since June. To help stem the decline, the central bank sold foreign currencies Sept. 23, stepping into the market again a week later.

While Belka didn’t rule out further efforts to shore up the Polish currency in today’s article, he reiterated that policy makers don’t and won’t target a particular zloty exchange rate.

Last month’s foreign-currency sales were aimed at preventing investors from speculating against the zloty “with impunity,” since which time the currency has become more stable, Belka said in the article.

--With assistance from Dorota Bartyzel in Warsaw. Editors: Andrew Langley, Balazs Penz

To contact the reporters on this story: David McQuaid at Katya Andrusz at

To contact the editor responsible for this story: Balazs Penz at

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