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UPDATE 1-Polish cbank may keep rates flat in Apr-cbanker

Published 04/20/2009, 03:05 AM
Updated 04/20/2009, 03:08 AM
TGT
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* Spike in inflation seen temporary

* Rates could fall as low as 3 pct

(Adds quotes)

WARSAW, April 20 (Reuters) - Poland's Monetary Policy Council (MPC) may need to pause this month in its policy of cutting interest rates because of a spike in inflation, a doveish member of the MPC said on Monday.

However, Stanislaw Owsiak also said rates could fall to 3 percent from the current 3.75 percent in the current easing cycle to help counter Poland's sharp economic slowdown.

"The information is a bit contradictory. On the one hand we have inflation at 3.6 percent so we are outside the target range (of 1.5-3.5 percent)... and this argument should be taken into account," Owsiak told TVN CNBC.

"I think we cannot exclude a pause in rate cuts... I cannot rule out a pause in April."

Owsiak, one of the most consistent supporters of monetary easing on the 10-strong panel, said a recent weakening in the zloty was a key reason behind a spike in inflation to 3.6 percent in March but he said its effects should dissipate soon.

"I think the zloty is likely to be strengthening... and there will be room for more rate cuts," Owsiak said, adding he could not rule out the main rate dropping to 3 percent.

The MPC has cut interest rates by 225 basis points since November as Polish industrial output has tumbled, unemployment has begun to creep higher and inflationary pressures have eased.

In a recent Reuters poll, a narrow majority of analysts said they expected a further 25 basis point rate cut in April. (Reporting by Patryk Wasilewski and Gabriela Baczynska)

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