Poland to Keep Interest Rates Steady Amid Increased Pressure on Easing
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Loading... - Flynn Abbey
- 04 Sep 2024
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Poland is expected to maintain its current interest rates at 5.75% during the upcoming meeting of the Monetary Policy Council (MPC) on Wednesday, despite increasing calls for monetary easing. This decision comes in the face of mounting pressure from both the government and some members of the central bank to begin lowering borrowing costs as inflation levels off.
Central Bank Governor Adam Glapinski, who has held a firm stance on keeping rates steady, previously indicated that rate cuts might not occur until 2026. However, he softened his position last month, suggesting that easing could happen earlier, reflecting some flexibility in response to evolving economic conditions.
The backdrop to this decision includes recent discussions at the US Federal Reserve's Jackson Hole symposium, where a shift toward easing was signaled by global peers like Fed Chair Jerome Powell. Poland’s Finance Ministry has also predicted that the National Bank of Poland will start reducing rates by the second quarter of 2024, aligning with broader government concerns that high rates could hinder economic growth.
Despite these pressures, Glapinski may argue for a cautious approach, particularly given the recent rebound in consumer prices and the government's expansionary fiscal policies for next year. Economic analysts, such as those from Bank Millennium, suggest that while financial markets are expecting a 125 basis point cut by 2025, the actual reduction might be closer to 75 basis points.
This situation illustrates the delicate balance Poland's central bank must strike between supporting economic growth and managing inflationary risks, with the timing and scale of any rate cuts being critical decisions in the near future.
