Polish Rate-Setter Sees Trump Win as Argument Against Tight Monetary Policy in Europe

(Bloomberg) -- Donald Trump’s return to the White House is an “argument against restrictive monetary policy in Europe” as his America First agenda may harm economic growth on the old continent, Polish policymaker Ludwik Kotecki said.

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“If such protectionist policies were reinstated or expanded, it could hurt European exports to the US and undermine economic growth in Europe, and thus in Poland,” Kotecki told Bloomberg News in Warsaw.

The Polish economy has already been hit by the slowdown in Germany with the central bank this week cutting its 2025 growth projection to 3.4%, compared with 3.9% forecast by the government. The central bank’s official view is still “slightly optimistic,” according to Kotecki, following a slump in retail sales.

With sticky inflation adding to these headwinds, Poland’s Monetary Policy Council may start discussing interest rate cuts in March, Kotecki said, as most of the uncertainties around price growth should be gone by then.

Budget Blues

He also has gloomy predictions for Poland’s public finances. Economic growth is unlikely to help keep next year’s budget deficit under control, as the finance ministry expects, and called planned deficit of 5.5% of economic output “disappointing.” “The looser the fiscal policy, the more restrictive the monetary policy must be,” Kotecki said.

But by March the uncertainties over inflation path should clearly be lower, he reckons. Kotecki sees a scenario in which energy price caps are extended beyond this year as more realistic. This should translate into lower inflation rates. The central bank sees 2025 inflation within the range of 4.2%-6.6%, depending on the government’s decision about electricity and gas prices.

For now, though, doubts over macroeconomic scenarios, including inflation, “still don’t create space for a quick rate cut,” said Kotecki, a member of the 10-strong MPC which has kept the benchmark rate on hold at 5.75% for 13 straight months.

“Taking all this into account, there is still a great deal of uncertainty,” he said. “Therefore, I still believe that the first possible date for the start of discussions on monetary easing will be March.”

The discussion in March could have three potential results, he added. Policymakers will either cut rates at the meeting, decide to wait one or two more months, or postpone the reduction for longer, according to Kotecki.

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