* Markets may overestimate scale of Polish hikes, Belka says
* Recent zloty weakening likely temporary
* If ECB raises rates earlier, MPC may raise more quickly
(Adds detail, background)
By Dagmara Leszkowicz
WARSAW, March 22 (Reuters) - Poland's central bank governor said on Tuesday the markets may be overestimating the size of rate increases over the next year at about 100 basis points. Marek Belka also said in an interview published on the central bank's website that the recent weakening of the zloty was temporary and caused by external factors, but added the unit was unlikely to gain significant ground in the near future.
"Three-month FRA (forward rate agreements) price in rate increases of around 100 basis points in a one-year horizon. In my opinion the markets may be overestimating the necessary size of the increases," the governor said.
His comments echoed those of Miroslaw Gronicki, an adviser to Belka, who told Reuters in an interview published on Monday that rate hikes totalling 100 basis points would only be required in the event of large capital outflows. [ID:nSLALEE7R]
Belka said one of the key factors for the Polish monetary council, the MPC,will be decisions of the European Central Bank.
"It is assumed that the ECB will raise rates only at the end of the year, but if the decision comes earlier, it will change the inflation projection (in Poland) and prompt an earlier interest rate increase," the governor said.
Expectations for a higher scale of monetary tightening in Poland have eased somewhat after recent data showed inflation remained flat at 3.6 percent on an annual basis in February, while wages grew by a much less-than-expected 4.1 percent.
TAKING LONG VIEW
Belka said the central bank should not react to monthly data and should consider the long-term outlook.
"We should evaluate the situation in a longer perspective. The economic rebound is continuing, but not every piece of recent data is good enough," he said.
The 9x12 forward rate agreements
On the Polish zloty
"We are already observing the zloty rebound," he said, though he added that the currency was unlikely to appreciate quickly in the near future.
The zloty hit 3-½ month lows last week, but has trimmed some losses and is now traded at around 4.03 to the euro.
The central bank's MPC raised interest rates by 25 basis points to 3.75 percent in January at the start of a new tightening cycle and is expected to increase borrowing costs by another quarter of percentage point in April.
Belka, who has the casting vote within the 10-strong MPC, opposed a rate hike in each month in the September-December period last year, but voted for a hike in January. The MPC did not meet in February and it left rates steady in March. (Reporting by Chirs Borowski and Dagmara Leszkowicz; editing by Richard Borsuk)