Poland's central bank ups rates, statement suggests more sure to come UPDATE

- WARSAW (Thomson Financial) - Poland's central bank raised interest rates for a fourth time this year today and issued a hawkish statement that signalled that more was sure to come in its battle to bring inflation back to its 2.5 pct target in quarters ahead.

The bank's 10-strong policy council said in its statement that it would seek to return inflation to a level in line with the target in the medium term, adding that pressure on prices and wages is still rising.

One of the majority on the council who supported earlier rate hikes, however, made clear that it had time to observe the economy and the impact of global food and fuel price rises before moving again.

'We are in a fairly comfortable situation, because the structure of economic growth is fairly healthy,' Andrzej Wojtyna told a news conference after the bank's monthly meeting.

'We are trying to avoid jumps in rates. A certain tightening of monetary policy is needed, but not a sharp one. The question of the size of potential rises in rates is an open one, but we have a certain period of calm.'

The bank said in its post-meeting statement the EU's largest former communist economy would continue to grow faster than its ideal non-inflationary rate and that inflation will be higher than shown in its most recent projection.

'The policy council has assessed the likelihood of inflation being above the target in the medium term as being higher than the chances of it being below,' it said.

Bank Governor Slawomir Skrzypek, alone in voting against its last rate rise, said that the council believed that it was not behind the curve in its bid to stop the economy from overheating.

After today's move, the bank's main stand at 5.0 pct, up 1 percentage point since April.

Wojtyna also said the bank would need to focus on the impact of fuel and food prices on inflation in months ahead, saying that he saw signs the global rise in inflation may be different in substance to previous shocks, whose impact on price growth has quickly faded.

Inflation rose to 3 pct in October but much of the rise is due to a jump in food prices outside of Poland, over which the council has no control.

The council raised rates quickly in response to the last such shock around EU entry, saying it was worried by the prospect expectations for inflation would rise as a result. Prices quickly rebounded, however, and some policymakers later admitted it had acted too aggressively.

The bank's decision was in line with market expectations and analysts said the statement and news conference comments could cool speculation of another possible rise in December.

'The communique was indeed 'hawkish', but to a degree anticipated by the market,' said analysts from Bank BPH in a note afterwards.

'The council did not suggest in any way that it intends to raise rates in December - so the scenario is only a risk in the event that inflation sharply accelerates.'

Source: By Paweł Sobczak, thomsonfxhub.com