Zloty Gains as Polish Central Bank Is ‘Hawkish’ After Rate Rise

The zloty advanced to the strongest in almost a week after Poland’s central bank raised interest rates for the second time this year and signaled borrowing costs may climb further.

zloty - US dollar

The zloty appreciated 0.5 percent to 4.0036 per euro as of 5:11 p.m. in Warsaw, the strongest intraday level since March 30. It had the second-steepest gain among more than 20 emerging market currencies tracked by Bloomberg. Six-month forward rate agreements that investors use to bet on future interest rate moves rose 3 basis points to 4.96 percent, the highest level in six weeks.

It’s too early to tell if Poland is nearing the end of its monetary tightening cycle, Governor Marek Belka said at a news conference in Warsaw today, and there is nothing “predetermined” about the speed and scope of possible rate increases. The central bank is continuing its tightening cycle as surging commodity prices risk keeping inflation high for a sustained period, it said in an e-mailed statement.

“The market is reading this statement as hawkish,” said Jan Koprowski, a currency trader at BNP Paribas SA in Warsaw. “Earlier they held back from talking about future rate increases and now that’s changed.”

Today’s quarter-percentage point increase lifted Poland’s benchmark seven-day rate to 4 percent, matching predictions from 22 of 31 economists surveyed by Bloomberg.

Policy makers across the globe are struggling to contain accelerating inflation, driven by surging food and fuel prices. Since March, when the Narodowy Bank Polski refrained from raising interest rates, the inflation rate remained above the bank’s 2.5 percent target for a fifth month, while the rate of consumer-price increases expected by consumers in the next 12 months posted its biggest one-month jump in a decade.