IMF urges Poland not to raise interest rates

The International Monetary Fund on Monday warned Poland against raising interest rates and said further rate cuts could be warranted if the zloty currency rises in value.

“Policy interest rates should not be raised at this stage, in view of the contained outlook for inflation and the excess capacity in the economy,” the Fund said, summing up an IMF board discussion on its annual review of the Polish economy.

“If increased capital inflows put persistent upward pressure on the zloty and inflation remains subdued, interest rates could be further cut, possibly complemented by transparent foreign-exchange interventions,” it said.

Inflation data due on Friday is expected to show inflation on a year-on-year basis dropping below the central bank’s 2.5 percent target for the first time since September 2007.

Still, most analysts expect the central bank to raise rates this year because inflation is expected to pick up in 2011.

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