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UPDATE 1-Poland's next rate rise must not be late-c.banker

Published 02/14/2011, 11:39 AM
Updated 02/14/2011, 11:40 AM

* Zielinska-Glebocka says c.bank must not be late with hikes

* Says Polish CPI pressures on the rise

* Polish zloty seen drifting, no strong appreciation in 2011

(Adds detail, quotes)

By Karolina Slowikowska and Marcin Goclowski

WARSAW, Feb 14 (Reuters) - Poland is in a race against time to ensure inflation stays under control and must raise rates further, a member of the bank's Monetary Policy Council (MPC), Anna Zielinska-Glebocka, said on Monday.

In some of the most hawkish comments since the MPC raised its key interest rate last month by 25 basis points to 3.75 percent, marking the start of a new tightening cycle, she also said she did not expect the zloty to appreciate much this year.

"Forecasts show that core inflation will be rising and this is information for us that we must think about monetary tightening ... I think that not being late with a rate hike will be the council's main challenge," Anna Zielinska-Glebocka told a Thomson Reuters Economic Spot panel.

"There is a need for reaction from the Monetary Policy Council, particularly when we look at core inflation."

Earlier on Monday, another member of the 10-strong MPC, Elzbieta Chojna-Duch, said Poland did not necessarily need a rate increase in March.. Analysts polled by Reuters see the next rate increase coming in April.

The zloty, under pressure on Monday, firmed a tad after her Zielinska-Glebocka's comments to trade at 3.93 to the euro -- about 0.5 percent up since the start of 2011 -- before easing back in choppy trade.

Zielinska-Glebocka said inflationary pressure had risen further since the MPC's last sitting in January and that annual inflation may peak at 3.6 or 3.7 percent in the first half of 2011, well above the central bank's 2.5 percent target.

Analysts expect inflation to have hit 3.4 percent in January, up from 3.1 percent in December.

"The way the situation develops will determine the depth of rate hikes. Maybe there will be one (hike) needed, maybe three, maybe four -- I don't know."

Asked whether another rate hike may come as early as the MPC's next sitting on Mar. 1-2, Zielinska-Glebocka said:

"I wouldn't want to say what we will do in March ... It seems there is a need to tighten monetary policy. The depth of tightening will be decided by many factors."

ZLOTY PROSPECTS

In contrast to some other policymakers, Zielinska-Glebocka played down the zloty's possible help in the central bank's battle against rising inflationary pressures and said the unit was probably going to drift in a range, without a clear trend.

"We are at a crossroads where I cannot predict whether or by how much the zloty could appreciate. There are so many factors and the zloty is very volatile. I don't think appreciation will be very strong. In my view, the zloty will be drifting this year, but I could be wrong," Zielinska-Glebocka said.

"This (zloty appreciation) cannot be an instrument replacing other instruments in monetary policy," she added.

Zielinska-Glebocka's comments on the zloty could signal a growing concern among policymakers that the strong zloty which some may have hoped for may not now materialise. (Reporting by Karolina Slowikowska and Marcin Goclowski; editing by Stephen Nisbet)

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