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IMF says wages key for Polish rate cycle

Analysis

Poland’s Monetary Policy Council (MPC) may be approaching the end of its policy tightening cycle, with wage data being the key factor, a senior IMF official said on Wednesday.

“The global slowdown is helping the MPC ... but they need to watch wages because that’s where the second round effects will show,” Ajai Chopra, deputy head of the International Monetary Fund’s Europe department, told Reuters. He said the Polish central bank, like its counterparts in mature economies, faced a tough challenge to balance short-term inflationary pressures with prospects of slower growth. “The MPC needs to watch the data very closely,” he said.

Chopra also said Poland’s fiscal response should be more robust to deal with strong demand pressures. In order to fight rising inflation -- at 4.1% in March and well above the central bank’s 2.5% target -- the MPC hiked the main interest rate seven times since April 2007, bringing the main rate to a current 5.75%. MPC holds its next monthly sitting on April 29-30, with some council members urging another hike. But MPC’s Jan Czekaj, a key swing voter, suggested on Tuesday that rates might not need to rise next week. (Reuters)

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