(Bloomberg) -- Several Polish policymakers distanced themselves from central bank Governor Adam Glapinski’s view that interest rates may not be cut at all next year, revealing a split just as the country’s economy slows.
Monetary Policy Council members Ludwik Kotecki, Henryk Wnorowski and Cezary Kochalski said they still expect the 10-person panel to start discussing monetary easing in March, instead of October like Glapinski predicted on Thursday.
Policymaker Ireneusz Dabrowski agreed with Glapinski that rate cut talks should start later in 2025 due to energy price risks, but didn’t rule out easing sometime next year. Meanwhile, MPC member Gabriela Maslowska told PAP news agency that Poland would probably start loosening policy in the second half of next year or in early 2026.
The governor’s U-turn — which came a month after he signaled that easing may take place around mid-2025 — surprised markets and sent the zloty to a two-month high. Tight monetary policy will increase worries over Poland’s $800 billion economy, which unexpectedly shrank in the third quarter, from the previous three months.
Kotecki, who is in a minority on the MPC that at times disagrees with Glapinski, told Bloomberg that the shift was probably based on political considerations and didn’t represent the position of the entire panel.
“It seems to me that the governor is unfortunately returning to politics again, which is regrettable,” Kotecki said.
Political Trigger
Glapinski is an ally of the populist Law & Justice party, which lost last year’s general elections and may be fully sidelined if they lose a presidential ballot due in mid-2025, as opinion polls currently indicate.
Prime Minister Donald Tusk has accused the governor of engaging in politics and launched a parliamentary inquiry into his actions. Tensions escalated further this week when police briefly detained central bank management board member Piotr Pogonowski and brought him in to testify in parliament as part of another investigation, this one into the use of the Pegasus spyware by Law & Justice. Kotecki said Glapinski’s shift “may be some revenge attempt.”
Kochalski said that he may back a rate cut in March if he is certain that inflation will ease sustainably. Poland’s consumer price index showed 4.6% year-on-year growth in November, while Glapinski said price growth would linger around 5% in the first half of next year.
“If I saw a disinflationary path in the medium term, and the level of risk associated with this decision was acceptable to me, I would support a decision to cut interest rates even as early as March,” Kochalski told Bloomberg.
Wnorowski told Bloomberg that the planned removal of energy price cap later next year “doesn’t erase the possibility of talks of possible reductions once we get acquainted with the March inflation projection.” He signaled, however, that monetary easing in 2025 may amount to less than 100 basis points due to the cap lapsing in September.
For Dabrowski, it may be too early to start discussing rate cuts in the first or second quarter of next year but he didn’t rule out a reduction in the benchmark rate of 5.75% sometime next year.
“The moment to discuss and possibly decide on an interest rate cut is the third quarter,” Dabrowski told Bloomberg. “The decision itself also needs to be delayed a bit, but not necessarily until 2026.”
Maslowska said she’s in favor of “a more cautious, wait-and-see approach,” adding that the central bank also needed to “take care of the real economy,” and not only focus on inflation.
Hawkish Doubts
The zloty was little changed on Friday after gaining 0.3% against the euro on Thursday. Meanwhile, the yield on Poland’s benchmark 10-year government bonds rose by another 2 basis points to 5.7% after a 9 basis point increase a day earlier.
Analysts also questioned Glapinski’s hawkish turn, saying that his main concern over energy prices appears overdone. Wholesale power prices don’t indicate that such risks to an inflationary spike in late 2025 exist, according to economists at ING Bank Slaski SA.
Furthermore, the governor toughened his rhetoric after the government implemented the power price freeze — which Glapinski had said in the past would help the MPC reduce interest rates earlier. Now, the same argument is being used to delay potential monetary loosening.
“What was the purpose of presenting the central bank’s optimistic scenario” implying a rate cut around the middle of 2025 “if the probability of its implementation was zero, according to the MPC,” ING economists, led by Rafal Benecki, wrote in a research note.
(Adds comments by policymaker Cezary Kochalski from paragraph 2)
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