Poland keeps interest rates unchanged

AP News
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Posted: Nov 09, 2011 11:23 AM
Poland keeps interest rates unchanged

The central bank kept its main interest rate unchanged at 4.5 percent on Wednesday, an expected move as it watches what impact the eurozone debt crisis will have on the Polish economy.

The decision comes as the country's strong economic growth _ at about 4 percent this year _ is projected to slow to between 2 and 4 percent next year due to the spillover effect from the crisis.

A rate cut now would be expected to stimulate growth, but would also add to inflationary pressure and further weaken the country's currency, the zloty, which has already depreciated significantly in recent months.

The annual inflation rate was 3.9 percent in September, markedly above the central bank's inflation target of 2.5 percent.

"The still elevated inflation and the threat of zloty weakening, which is a key risk for price stability, are reasons why an interest rate cut is difficult," said Maja Goettig, the chief economist for Bank BPH in Warsaw, in a statement.

In explaining its decisions to hold interest rates steady, the National Bank of Poland noted "heightened uncertainty about global economic developments in the coming quarters and about the scale of economic slowdown in countries being Poland's main trading partners."