Bloomberg News

Poland’s Next Rate Move to Be an Increase, Morgan Stanley Says

March 22, 2013

Poland’s next move in interest rates will be an increase, probably by 0.5 percentage point in the second half of next year, Morgan Stanley (MS:US) said.

Recent weakness in factory output and retail sales isn’t enough to persuade policy makers to cut the benchmark rate from a record-low 3.25 percent, Pasquale Diana, an emerging-markets economist at Morgan Stanley in London, said in a report today.

“We think that the next move in rates is up, in 2014,” Diana wrote. “These downside surprises are really not the sort of deviation that is needed to trigger more rate cuts. The Monetary Policy Council is set to wait and see for some months, and we think there are no further cuts from here.”

While the central bank surprised the market with a deeper- than-predicted reduction of 50 basis points, or 0.5 percentage- point, on March 6 and signaled an end to its easing cycle, Governor Marek Belka last week said policy makers may do more if growth undershoots their expectations.

The largest economy among the European Union’s eastern members will expand 1.3 percent this year, the worst since 2001, and 2.6 percent in 2014, the central bank estimates.

Industrial production fell 2.1 percent in February from a year earlier, a report showed on March 19, exceeding the median estimate of a 1.6 percent slump in a Bloomberg survey of 31 economists. Retail sales fell 0.8 percent from a year earlier, compared with a 3.1 percent gain in January, a report showed today. The median estimate of 29 economists in a Bloomberg survey was an 0.7 percent increase.

The zloty strengthened 0.4 percent to 4.1744 per euro as of 5:10 p.m. in Warsaw, snapping a four-day losing streak. It has weakened 3.7 percent this year, the sixth-worst performance among more than 20 emerging-market currencies tracked by Bloomberg.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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