Polish central banker Gatnar: rates at 'optimal' level for now

October 26, 2016 10:10 AM EDT

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By Pawel Florkiewicz

WARSAW (Reuters) - The current level of interest rates in Poland is optimal for now as it supports the economy, while at the same time does not discourage savings or hurt financial sector stability, central bank interest rate-setter Eugeniusz Gatnar said.

The policymaker also told Reuters in an interview that a hike was the more likely next rate move and it could take place in 2018.

His remarks reinforce the current wait-and-see stance of the Monetary Policy Council (MPC) and echo comments of Governor Adam Glapinski who said rates would remain flat until they hopefully were raised in early 2018.

"We are stabilizing interest rates at the lowest level ever, which facilitates economic development and at the same time does not destabilize the financial sector," Gatnar said on Tuesday in comments authorized for release on Wednesday.

"I think that the current level of rates is optimal for now," he said.

Since his appointment in January, Gatnar has backed the majority of the 10-member rate-setting panel in saying rates should remain unchanged as they support balanced economic growth.

Gatnar said there are currently no problems in Poland's banking sector and credit has been growing steadily.

"All this makes me think about further stabilizing them (interest rates). At the same time, I think that we are facing an outlook of them increasing. In my opinion this outlook concerns 2018," he said.

The bank has kept rates at an all-time low of 1.5 percent since a 50 basis point cut in March last year.

While consumption has remained robust, Poland suffered its biggest contraction in investment for almost four years in the second quarter as political uncertainty discouraged firms from spending at a time of reduced European Union aid.

"I do not see a need to cut rates to increase credit action. This would be ineffective," he said, adding the gradual easing of deflation is also a factor that speaks against cutting rates.

Consumer prices fell by 0.5 percent in September, statistics office data showed earlier this months, less than their 0.8 percent decline the previous month.

Gatnar said he did not envisage economic growth picking up significantly until the end of the year, adding he expects growth at 3.2 percent year-on-year in the third quarter, just a tad above the 3.1 percent from the second quarter.

"Similarly in the fourth quarter, I also think that economic growth will exceed 3 percent, and in the whole year it will reach about 3.2 percent," he said.

Last year, economic growth reached 3.9 percent as Poland accelerated its spending of EU aid before a transition to the next 7-year EU aid budgeting period.

(Reporting by Pawel Florkiewicz; Writing by Marcin Goettig; Editing by Toby Chopra)



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