June 16, 2020 / 1:55 PM / 16 days ago

UPDATE 2-Polish c.bank signals concern at currency strength during pandemic

* Polish c.bank keeps rates unchanged, as expected

* Says zloty currency immunity to pandemic a problem for economy

* Analysts expect interventions if zloty rises

* (Adds more comments, releads to reflect MPC concerns about zloty)

By Marcin Goclowski and Anna Koper

WARSAW, June 16 (Reuters) - Poland’s central bank signalled on Tuesday it would have preferred the national currency, the zloty, to be weaker during the coronavirus pandemic to support economic recovery, economists said.

The Monetary Policy Council (MPC), which has cut rates three times this year by a cumulative 140 basis points to 0.1% to tackle the economic slowdown, said that its actions would limit the risk of inflation falling below its target of 2.5%.

Government forecasters had expected the Polish economy to contract by up to 10% in the second quarter, while the Organisation for Economic Co-operation and Development (OECD) predicted Poland’s economy will shrink by 7.4-9.5% this year.

The National Bank of Poland said it expected that in the near term “further recovery” of economic activity may be expected. However it was concerned that it may be limited by lower wages and uncertainty about the pandemic’s consequences.

“The pace of the economic recovery could also be mitigated by the lack of visible zloty exchange rate adjustment to the global pandemic shock and to the monetary policy easing introduced by NBP,” a central bank statement said.

Bank Pekao senior economist Adam Antoniak commented in a note: “We perceive this fragment as a clear suggestion that policymakers would prefer weaker than currently observed PLN exchange rate vs. foreign currencies.”

The Polish currency has lost 4% against the euro and 3.7% versus dollar so far this year, Refinitiv Eikon data shows.

But in May the zloty strengthened by 2.1% versus the euro, outperforming the Czech crown and the Hungarian forint.

“Should the PLN firm from the current levels, we would not rule out verbal interventions from the MPC or even NBP interventions on the exchange rate market to prevent excessive PLN appreciation,” Pekao’s Antoniak said.

At 1450 GMT the zloty was 0.14% weaker on the day, after having been firmer before the central bank announcement. (Additional reporting by Pawel Florkiewicz, Alan Charlish, and Agnieszka Barteczko; Editing by Alexander Smith, William Maclean)

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