Polish central bank head says interest rates could be cut at end of 2023 By Reuters

By Anna Koper

WARSAW (Reuters) – Polish interest rates could be cut at the end of 2023, the central bank governor said on Thursday, after policymakers decided to leave the cost of borrowing unchanged as they observe the effects of rate hikes implemented so far.

With the main interest rate staying at 6.75% for a fourth month in a row on Wednesday and inflation for December coming in lower than expected, markets’ focus has turned to when the National Bank of Poland (NBP) could start loosening policy.

“As soon as possible, interest rates will be lowered,” Adam Glapinski told a news conference. “Will it be possible at the end of this year? I still hope so. Less than recently, but I do.”

Analysts polled by Reuters expect stable rates until the end of 2023.

The dovish majority on the Monetary Policy Council (MPC) has said that an expected slowdown in emerging Europe’s largest economy will act alongside a cumulative 665 basis points of tightening delivered in 2021 and 2022 to bring down inflation.

This view appeared to be supported on Friday when a statistics office flash estimate showed that inflation was 16.6% in December, well below the 17.3% forecast in a Reuters poll.

Glapinski said that he expected inflation to rise in January and February but that it would slide thereafter.

“We expect that at the end of the year, as you see in the November projection, inflation will be in the single digits. I think there is 8% in the projection… but maybe it will be less than 8%.”

He said the cycle of 11 rate hikes the central bank began making in 2021 was having a clear effect on the economy.

“Our hikes, made gradually every month, are gradually having more and more influence on the economy towards tightening, towards limiting demand,” he said.

However, he said that the bank had still not officially closed the tightening cycle, meaning further hikes could be made if needed.