There is no need for Poland to cut interest rates further, central banker Eryk Lon wrote in an article published on Monday, but the central bank should continue to buy state and state-guaranteed bonds on the secondary market.
Poland’s benchmark interest rate has been at a record low of 0.1% since May, and governor Adam Glapinski has said that rates are most likely to remain stable until his current term ends in 2022.
“The high level of the PMI index for manufacturing recorded in a relatively difficult epidemiological situation… is an extremely strong argument for me that, in the context of the expected macroeconomic conditions, there is currently no need to reduce interest rates,” Lon wrote.
IHS Markit’s Purchasing Managers’ Index (PMI) for Polish manufacturing for March showed the strongest overall improvement in business conditions at manufacturers since January 2018.
“However, I see the need to continue the treasury bond purchase program in order to ensure that yields are as low as possible,” Lon said in the article, which was published on the website of Catholic radio station Radio Maryja.
In March, Poland’s central bank said it would increase the frequency and flexibility of its bond-buying operations due to rising yields.