Polish Central Banker Sees 2025 Rate Cuts, Defying Boss’s Bet
(Bloomberg) -- A Polish central banker said interest-rate cuts are likely in the first half of next year, the latest dissent against Governor Adam Glapinski’s prediction that the benchmark will remain on hold until 2026.
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Ireneusz Dabrowski, a member of the rate-setting Monetary Policy Council who tends to vote with Glapinski’s majority, said the National Bank of Poland chief’s surprise announcement was an expression of the “most pessimistic scenario” set out by policymakers.
Some members of the MPC have pointed to continued pay hikes to workers and the risk of a surge in core inflation as factors buoying price increases.
“I don’t share these concerns,” Dabrowski said in a phone interview Wednesday, his first comments since Glapinski’s hawkish pronouncement on July 4. “The most likely scenario is still that rates remain unchanged until the end of this year and any changes, most likely rate cuts, will only take place in the first or second quarter of next year.”
The central bank’s inflation projection to be released in November will provide the most insight on prices, Dabrowski said, since it will gauge the impact of a partial unfreezing in energy prices on inflation over time.
The caution among policymakers in Warsaw has been upended by the shifting monetary landscape in the US, with the Federal Reserve coming under pressure to cut rates as fears of a recession mount.
The market turmoil has spread to eastern Europe, with Poland’s 10-year bond yield slipping about 50 basis points in the past month — the biggest decline among European peers — and hitting a 2024 low of 5.06% earlier this week. Money-market derivatives show bets on more than a full percentage point of cuts within the next 12 months.
Dabrowski suggested that those market moves aren’t excessive, with Polish bond yields returning to levels from the start of the year. He also played down the shift in derivatives.
“The market is grasping at straws and naturally betting on one of the scenarios favorable to itself,” he said.
The policymaker said the benchmark rate at 5.75% — a level the central bank has held since October — isn’t having a significant impact on economic growth. He also sought to dispel concerns over the risk that a higher rate compared with regional peers will feed into excessive zloty appreciation.
“This is a myth and there is no such risk,” Dabrowski said.
--With assistance from Peter Laca.
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