By Adrian Krajewski and Marcin Goettig
WARSAW, March 2 (Reuters) - Poland's central bank kept interest rates steady on Wednesday, choosing to hold off on further moves despite accelerating inflation and more signs of a robust economic recovery.
Analysts had been split almost down the middle over whether the bank would raise or hold rates at 3.75 percent and the Polish zloty shed some 0.4 percent against the euro after the announcement, while bond yields eased.
The bank will release a statement and hold a news conference at 1500 GMT to explain the decision, which follows the bank's January move to raise rates for the first time since the 2008 financial crisis.
'We think this was a close decision,' said Peter Attard Montalto, an economist at Nomura International.
'A majority on the MPC, whilst recognising the need for hikes, want a measured cycle (of rate rises) and the currency wasn't quite weak enough to trigger more rapid hikes. We still see the next rate hike in April,' he said.
Earlier, statistics office data showed Poland's economy grew by 4.4 percent year-on-year in the fourth quarter of 2010, helped by robust domestic demand and in line with forecasts, up from 4.2 percent in the July-September period.
Domestic demand was up 5.6 percent and private consumption grew 4.1 percent on an annual basis in the fourth quarter, while investments rose by a still relatively weak 0.9 percent.
Previously released data had shown the European Union's largest ex-communist economy expanded by 3.8 percent in 2010 as a whole, up from 1.7 percent in 2009.
The European Commission this week forecast the Polish economy would grow 4.1 percent this year.
FISCAL TIGHTENING
Analysts attributed the strong consumption reading partly to Poles rushing out to shop ahead of a one percentage point rise in value-added tax on Jan. 1 and they also noted the pace of growth on a quarterly basis had slowed from July-September.
'We expect the momentum (of growth) could be slightly slower in the first half of this year as fiscal policy is tightened and the key export markets are expected to lose momentum,' said Anders Svendsen, chief analyst at Nordea.
'We expect growth to be driven primarily by domestic demand this year,' Svendsen added.
Strong domestic demand played a key role in helping Poland avoid recession during the 2008-09 global financial crisis, unlike smaller neighbouring economies such as the Czech Republic and Slovakia which are much more dependent on exports.
Inflation touched 3.8 percent in January, up from 3.1 percent in December and was well above the bank's target of 2.5 percent.
'The reason behind some MPC members' reluctance to hike is that second round effects have not materialised while the imminent 2012 fiscal tightening and the uncertain outlook for external growth (additionally threatened by high oil prices) limit necessary monetary tightening,' said Rafal Benecki, senior economist at ING Bank in Warsaw.
'We think this decision increases the risks that the MPC will be forced to play catch-up with tightening in the coming months. A hike in April is very likely.'
(Writing by Gareth Jones; Editing by Patrick Graham) Keywords: POLAND ECONOMY/ (gareth.jones@thomsonreuters.com; Warsaw newsroom, +48 22 653 9706) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WARSAW, March 2 (Reuters) - Poland's central bank kept interest rates steady on Wednesday, choosing to hold off on further moves despite accelerating inflation and more signs of a robust economic recovery.
Analysts had been split almost down the middle over whether the bank would raise or hold rates at 3.75 percent and the Polish zloty shed some 0.4 percent against the euro after the announcement, while bond yields eased.
The bank will release a statement and hold a news conference at 1500 GMT to explain the decision, which follows the bank's January move to raise rates for the first time since the 2008 financial crisis.
'We think this was a close decision,' said Peter Attard Montalto, an economist at Nomura International.
'A majority on the MPC, whilst recognising the need for hikes, want a measured cycle (of rate rises) and the currency wasn't quite weak enough to trigger more rapid hikes. We still see the next rate hike in April,' he said.
Earlier, statistics office data showed Poland's economy grew by 4.4 percent year-on-year in the fourth quarter of 2010, helped by robust domestic demand and in line with forecasts, up from 4.2 percent in the July-September period.
Domestic demand was up 5.6 percent and private consumption grew 4.1 percent on an annual basis in the fourth quarter, while investments rose by a still relatively weak 0.9 percent.
Previously released data had shown the European Union's largest ex-communist economy expanded by 3.8 percent in 2010 as a whole, up from 1.7 percent in 2009.
The European Commission this week forecast the Polish economy would grow 4.1 percent this year.
FISCAL TIGHTENING
Analysts attributed the strong consumption reading partly to Poles rushing out to shop ahead of a one percentage point rise in value-added tax on Jan. 1 and they also noted the pace of growth on a quarterly basis had slowed from July-September.
'We expect the momentum (of growth) could be slightly slower in the first half of this year as fiscal policy is tightened and the key export markets are expected to lose momentum,' said Anders Svendsen, chief analyst at Nordea.
'We expect growth to be driven primarily by domestic demand this year,' Svendsen added.
Strong domestic demand played a key role in helping Poland avoid recession during the 2008-09 global financial crisis, unlike smaller neighbouring economies such as the Czech Republic and Slovakia which are much more dependent on exports.
Inflation touched 3.8 percent in January, up from 3.1 percent in December and was well above the bank's target of 2.5 percent.
'The reason behind some MPC members' reluctance to hike is that second round effects have not materialised while the imminent 2012 fiscal tightening and the uncertain outlook for external growth (additionally threatened by high oil prices) limit necessary monetary tightening,' said Rafal Benecki, senior economist at ING Bank in Warsaw.
'We think this decision increases the risks that the MPC will be forced to play catch-up with tightening in the coming months. A hike in April is very likely.'
(Writing by Gareth Jones; Editing by Patrick Graham) Keywords: POLAND ECONOMY/ (gareth.jones@thomsonreuters.com; Warsaw newsroom, +48 22 653 9706) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.