(Bloomberg) -- Polish Finance Minister Andrzej Domanski said there were communication problems with the central bank as he called for lower interest rates to revive investment.
Governor Adam Glapinski blindsided investors last week by saying prospects for monetary easing were likely delayed into 2026 from early next year.
The move sparked accusations that it was politically-motivated and prompted a front-runner in Poland’s presidential elections to call on the central bank chief to stop interfering with the economy.
“There are some problems with the communication with the central bank, but it’s not my job to say negatively about what the central bank is doing,” Domanski said in a Bloomberg TV interview on Wednesday. “What I’m really interested in is, of course, the fall of inflation.”
Glapinski, on his part, has argued the inflation outlook has become more “complicated” because of the government’s decision to only cap power prices until September, which might risk a flare-up in inflation later.
The governor has been an ally of the former nationalist administration, which lost power in last year’s general elections. Since then, he’s become a target of a parliamentary probe into his alleged political partisanship led by the ruling coalition’s lawmakers. Glapinski has denied any wrongdoing.
A longer period of unchanged rates could undermine assumptions made by Prime Minister Donald Tusk’s cabinet that recovering economic growth will help curb the fiscal deficit next year to 5.5% of gross domestic product. The budget assumes gradual monetary policy easing starting in the second quarter.
Domanski said that lower interest rates would be “supportive” for investments, adding he was “still confident in the forecast of close to 4% of GDP growth next year.”
Poland’s economy unexpectedly contracted by 0.2% in the third quarter compared with the previous period because of waning consumption.
The slowdown comes as the government is facing a rising bill for its plan to ramp up defense spending to 4.7% of economic output next year. Domanski said the government is comfortable with financing the military program, and issuing special defense bond domestically was “one of the options” to cover its needs.
(Updates with context and comments starting in the second paragraph)
©2024 Bloomberg L.P.