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UPDATE 1-Poland's central bank head sees unchanged rates to end of 2018
October 4, 2017 / 4:43 PM / 2 months ago

UPDATE 1-Poland's central bank head sees unchanged rates to end of 2018

(Adds quotes, details)

By Pawel Florkiewicz and Marcin Goettig

WARSAW, Oct 4 (Reuters) - Polish interest rates will probably stay at their current all-time lows until the end of 2018, the bank’s Governor Adam Glapinski said on Wednesday, dismissing worries that a pick-up in wages could spark higher inflation.

Speaking after the bank’s Monetary Policy Council (MPC) kept its key rate at 1.5 percent, Glapinski said Poland -- where unemployment is at a record low -- still had large reserves in the labour market, adding that inflation would likely ease over the next few quarters.

Polish consumer inflation accelerated to a 7-month high of 2.2 percent in September as corporate sector wages were growing at their fastest pace in more than five years. The central bank targets inflation at 2.5 percent.

“This is my private expectation and I haven’t changed it. I don’t see reasons to change rates until the end of 2018, but it doesn’t have to be an opinion shared by all MPC members,” Glapinski told a news conference after the decision.

“I would expect a stabilisation of interest rates until the end of 2018,” said Glapinski, who head the 10-member MPC.

The governor said the bank will likely to slightly increase the path of expected inflation when it publishes its new longer-term forecasts in November, but said price growth was likely to ease in the coming quarters.

“Inflation is a little bit higher than we expected ... We expect it to fall to around 1.5 percent in the coming quarters,” he said.

The bank said in a statement released earlier on Wednesday that rising domestic inflation pressure would be offset by an external environment of relatively low inflation.

A Reuters poll suggested earlier in October that the central bank was likely to keep interest rates on hold until it increases them in the fourth quarter of 2018.

Dismissing worries that wages could significantly accelerate further, Glapinski said Poland still had extensive reserves on the labour market, especially compared to other countries in the region like Hungary where wage growth was in double digits.

“We have large reserves in the labour market ... there is much to be done with respect to labour market participation of youth, women plus Ukraine and Belarus,” Glapinski said, referring to migrant workers.

Poland lowered its retirement age from the start of October, a move that could lead about 2.0 percent of Poland’s 16.3 million workers to choose the option to retire earlier.

But Glapinski said last month that the inflow of hundreds of thousands of Ukrainian workers was reducing the pressure on the labour market.

The central bank has kept interest rates unchanged since a 50 basis point cut in March 2015.

Additional reporting by Pawel Sobczak and Bartosz Chmielewski; Writing by Marcin Goettig Editing by Jeremy Gaunt

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