(Bloomberg) -- Poland extended its period of interest-rate stability to one year after inflation picked up beyond the central bank’s tolerance range.
The Monetary Policy Council kept its benchmark at 5.75% in line with the forecasts of all 35 economists surveyed by Bloomberg. The decision comes after regional peers in the Czech Republic and Hungary both reduced rates and the Federal Reserve eased its monetary policy for the first time in four years with a half-point rate reduction.
Poland has been reluctant to join the easing trend, citing inflation risks stemming from the government’s moves to partly lift energy price caps and restore a higher food tax rate. The central bank’s cautious stance has helped buoy the zloty but comes at the cost of higher yields for the government, which faces increased debt servicing costs and a swelling deficit.
The MPC is expected to issue a statement at 4pm while Governor Adam Glapinski will hold his monthly news conference at 3pm on Thursday. Investors will focus on whether a dovish tilt in policymakers’ comments is maintained in light of data showing that inflation accelerated to a new 2024 high in September, reaching 4.9%.
Glapinski unexpectedly said last month that rates could be lowered around the middle of next year and a number of policymakers suggested that cuts may be discussed by the MPC as early as in March.
“We expect the domestic inflation outlook to dominate the MPC communication in the near term, as long as the widening interest rate disparity does not cause excessive appreciation in the zloty,” ING Bank Slaski economists led by Rafal Benecki said in a note.
The rate decision coincides with a meeting of the parliamentary committee in charge of investigating Glapinski’s actions. The panel was expected to take testimony from its first witnesses on Wednesday. The governor has repeatedly denied any wrongdoing, criticizing the probe as “unjustified” and eroding the independence of the central bank.
--With assistance from Barbara Sladkowska.
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