(Adds quotes from statement and background)
WARSAW, March 24 (Reuters) - The National Bank of Poland
(NBP) should be prepared to raise interest rates further if
necessary, the International Monetary Fund (IMF) said in a
statement published on Friday, arguing that loose fiscal policy
could harm the fight against inflation.
Poland's main interest rate has been at 6.75% since
September, with most economists regarding further tightening as
unlikely and instead focusing on when the cost of credit could
come down.
"The NBP should continue to respond to changing conditions
and, in particular, be prepared to raise interest rates further,
if necessary to reduce inflation to the target by end 2025," the
IMF said.
Inflation in emerging Europe's largest economy has hit
levels not seen since the 1990s and the government has
introduced a raft of measures, including payment holidays for
mortgage holders and energy subsidies, to help the public deal
with the surging cost of living.
However, the IMF warned that expansive fiscal policy could
complicate the fight against inflation.
"In the short run, fiscal policy should support the central
bank's efforts to reduce inflation by avoiding a fiscal
loosening this year," it said "Future energy support measures,
if needed, should be more targeted according to need and allow a
greater role for price signals to promote energy conservation."
It also warned that the government's payment holiday
programme, which allows borrowers to defer payment on eight
instalments over two years, was putting strain on the banking
sector.
"Mortgage credit holidays made available to all borrowers
have led to significant costs for banks and should not be
extended," it said.
The IMF said that Poland's deficit was expected to widen to
4.5% of gross domestic product (GDP) in 2023 due to the slowing
economy and higher interest payments.
It forecasts GDP growth of 0.3% in 2023, 2.4% in 2024 and
3.7% in 2025. It expects average inflation to be 11.9% in 2023,
6.1% in 2024 and 4.1% in 2025.
(Reporting by Anna Wlodarczak-Semczuk; writing by Alan
Charlish; editing by Jonathan Oatis)
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