Poland sees inflation declining faster than expected and the economy growing below estimates, so the interest rates have been adjusted, Adam Glapinski, governor of the central bank (NBP), has told a press conference following a surprising interest rate cut to 6%.
“Poland has met previously-assumed conditions for an interest rate cut, namely reaching single-digit inflation and an estimated fast decrease of inflation in the coming quarters,” Glapinski said on September 7, a day after the Monetary Policy Council cut the reference interest rate by 75 basis points to 6%, taking the market by surprise.
Glapinski added that currently inflation was at 9.6% and was expected to fall to 8.5% at end-September, 7.4% in October and to 6-7% until year-end.
“We have just left the territory of high inflation and entered the level of mild inflation below 10% and (hopefully) we will be heading towards the creeping inflation of 5% or less,” the NBP chief said.
However, he admitted that coming down from 5% inflation might prove difficult, as globally some expect that inflation at this level might be persistent.
Glapinski said that projections of some banks saw Poland’s CPI approaching the upper end of the target range of inflation, which was 2.5% plus/minus 1%, in mid-2024, while the central bank’s projection saw it happening in 2025.
The governor announced that the NBP’s new projection is to be released in November and in this document all data would be verified.
“Today’s reference interest rate of 6.00% amid 9.6% inflation is stronger than the previous rate of 6.75% applied when the inflation stood at 18.4%,” he said.
When referring to the MPC decision to cut rates by 0.75%, to the general surprise of economists, he said that it was hard to expect delight from banking analysts of foreign banks when the country was cutting rates, as high interest rates were beneficial to banks.
Apart from a faster decline in inflation, the MPC saw slower growth than expected, Glapinski said, adding that now Poland’s GDP growth in 2023 was expected to be weaker than previous estimates, even at the level of 0%.
Glapinski also acknowledged the recent depreciation of the Polish zloty following the MPC decision to cut rates, but he saw a 2% depreciation as having no imminent impact on inflation. Still, he expressed hope that the PLN would stabilise at a level reflecting Poland’s economic fundamentals, as a strong zloty helped fight inflation.
When asked about the MPC’s future decisions, he said that he was going to follow the stance presented by the ECB chief, Christine Lagarde, who declared nothing about the future apart from following developments and taking decisions accordingly. Soon all central bankers will meet in Basel to discuss their monetary policies.
Nevertheless, he said, once inflation was confirmed to be declining swiftly towards 5% and lower, interest rate cuts would follow.
“A 75-basis point cut is a deep adjustment, and further down the road we will be acting according to our assessment of the situation,” Glapinski said. (PAP/Business World Magazine)