Poland seen cutting rates by 25 bps in March and in Q2

WARSAW: Poland is likely to cut interest rates by 25 basis points next week before delivering one more reduction in the second quarter to counter a long decline in consumer prices, a Reuters poll showed on Friday.

Seventeen out of 25 economists polled from Feb. 25 to Feb. 27 expect the central bank's Monetary Policy Council (MPC) to cut the benchmark rate to a new record low of 1.75 percent when it meets on Tuesday and Wednesday next week.

Five analyst see a 50 basis point cut, while three expect no change.

On average, the poll gave a 57 percent chance of a 25 basis point cut in March, a 25 percent chance for a half-point cut and an 18 percent chance rates will remain unchanged.

The median of forecasts showed analysts expect rates to bottom out at 1.50 percent in the second quarter, implying one more quarter-point cut, and stay at that level for a year.

The next change in rates is expected to be a 25 basis point increase in the second quarter of 2016.

The central bank is due to publish new inflation and growth forecasts in March, which analysts say may convince at least one of two key swing voters on the 10-member Council, Elzbieta Chojna-Duch and Jerzy Hausner, to back a rate cut.

Upbeat comments from Chojna-Duch on Friday on the economic growth outlook suggested she may not be willing to back any cut deeper than 25 bps. "It will be hard to convince the swing voters to back a deeper rate cut," said Arkadiusz Krzesniak, Poland chief economist at Deutsche Bank.

The rate-setting panel remains divided, with secretly taped recordings revealed last year in which Governor Marek Belka used expletives to describe Hausner and the MPC having increased internal tensions.

Belka said on Feb. 4 the bank that a March rate cut was likely and on Feb. 19 that data showed scope for some reduction.

Consumer prices fell by 1.3 percent in January, moving even further from the bank's 2.5 percent inflation target. Falls have been driven largely by cheap oil, with economic growth staying robust at 3.3 percent last year.

Poland has cut its benchmark interest rate by a total 275 basis points since late 2012 to spur growth and inflation in central and eastern Europe's largest economy.