Reuters: US Dollar Report: UPDATE-1-Poland cuts interest rates as economy slows

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UPDATE-1-Poland cuts interest rates as economy slows Nov 7th 2012, 12:14 Wed Nov 7, 2012 7:14am EST * Polish c.bank cuts rates by 25 bps to 4.5 pct * First rate cut in 3 years * News conference to explain the decision due at 1500 GMT WARSAW, Nov 7 (Reuters) - Poland's central bank cut interest rates for the first time in three years on Wednesday, belatedly joining other banks in the region to ease monetary policy to help slowing economies. The Polish bank's 10-strong Monetary Policy Council (MPC) reduced the key rate by 25 basis points to 4.5 percent, starting a long-awaited easing cycle that will likely last well into next year. The zloty and bonds showed little reaction as 26 of the 27 analysts polled by Reuters had expected the move. "The series of macroeconomic data releases pointing to a deepening economic slowdown have persuaded the undecided policymakers to finally reduce borrowing costs today," said Grzegorz Maliszewski, chief economist at Bank Millennium. Analysts have been calling on the central bank to slash borrowing costs on the back of falling investments and waning private consumption. But Polish policymakers remained focused on stubbornly high inflation and last raised interest rates in May, saying the slowdown was only moderate and kept them unmoved since then even as their own forecasts put next year's growth at 2 percent from 2.5 percent this year and 4.3 percent in 2011. Some economists said the bank would now play catch-up. "The easing expectations are very aggressive," said Rafal Benecki, chief economist at ING Bank in Warsaw. But the easing cycle may not be as extensive as many believe and not as deep as in the neighbouring Czech Republic, where rates are close to zero and the central bank is hinting at possible currency interventions to weaken the crown even further. Sources close to the Polish central bank recently said that market expectations for cuts were excessive because unlike its neighbours, Poland was growing and is unburdened by the unrelenting budget austerity affecting others in the region. The bank will hold a news conference to explain its decision at 1500 GMT. Link this Share this Digg this Email Reprints

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