Poland to Keep Interest Rates on Hold as Cut Talk Grows

Piotr Skolimowski and Barbara Sladkowska
·2 min read

(Bloomberg) -- Poland will keep interest rates unchanged, with focus turning to how quickly Governor Adam Glapinski may pivot to cuts after inflation eased from the highest level in more than a quarter century.

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The central bank will keep the benchmark rate at 6.75% for the seventh straight month on Wednesday, according to all 31 economists surveyed by Bloomberg. Investors are betting on more than half a percentage point in cuts this year. The International Monetary Fund has advised the policy makers to quash any discussion about easing and be ready to resume rate increases if inflation stays high.

Glapinski revived speculation last month by saying he “personally” hoped the Monetary Policy Council will be able to cut rates in the fourth quarter after inflation slows to single digits in September.

Consumer prices rose 16.2% in March from a year earlier, their slowest pace since August. That was mainly due to the fading shock of the war in Ukraine on energy and food costs.

The central bank is eager to show it has wrestled back control over inflation following a yearl-ong campaign of rate increases as the cost-of-living crisis turns into a key point of contention before parliamentary elections expected in October. Glapinski will hold a news conference at 3 p.m. in Warsaw on Thursday.

“The situation with core inflation remains uncertain, so the MPC will likely refrain from openly signaling a rate cut just yet,” said Piotr Bujak, chief economist at PKO Bank Polski SA in Warsaw. “Yet a worsening labor market and spending will eventually damp price pressures in the latter part of the year, creating the room for cuts.”

The economy contracted in the last three months of 2022 from the previous quarter, and consumers began to pull back as wages can’t keep up with inflation.

The governor and policy makers have refrained from calling a formal halt to the hikes, which took Poland’s key rate up 665 basis points from near zero in 2021. Joanna Tyrowicz, one of most vocal inflation-fighters on the 10-person MPC, called discussions about cuts “irresponsible.”

The central bank focuses on keeping inflation in 1.5%-3.5% range. Glapinski said last month that lowering price growth to around 5% to 7% would be a “great success, as society doesn’t notice such price increases.”

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