WARSAW, Jan 15 (Reuters) - Polish interest rates could drop
below zero if the coronavirus pandemic causes further,
significant damage to the economy, central bank governor Adam
Glapinski said on Friday, adding that his base scenario was no
change in borrowing costs.
A move to negative borrowing costs would be uncharted
territory for emerging Europe's largest economy, where the
benchmark rate has been at a record low of 0.1% since May, but
Glapinski said the situation would have to get much worse to
"Yes, I allow for rate cuts. Yes, I allow for negative
rates," Glapinski said in comments broadcast on the bank's web
"This would have to be connected with a radical
deterioration of the economic situation, and we assume, on the
contrary, that this year the economic situation will gradually
He said the base case scenario was stable rates until 2022.
Glapinski also said the bank had intervened on the foreign
exchange market since mid-December to prevent a sudden rise in
the zloty currency.
While declining to say exactly how big the interventions had
been, Glapinski said their size had been "significant" and
"incomparable to any other previous intervention".
However, Glapinski said that the bank did not have a
specific target for the value of the zloty and that, while the
central bank could intervene in the market, it would continue to
have a free-floating exchange rate.
"We do not strive to maintain the rate at a predetermined
level," he said.
(Reporting by Alan Charlish, Pawel Florkiewicz, Justyna Pawlak
and Anna Koper; Editing by Toby Chopra)