Poland recently made a surprising interest rate cut to 6 percent due to lower-than-expected inflation and slower economic growth, according to Adam Glapiński, the governor of the central bank (NBP). Glapiński stated that the conditions for the rate cut had been met, including single-digit inflation and the projected decrease of inflation in the future. Currently, inflation is at 9.6 percent but is expected to fall to 8.5 percent by the end of September, 7.4 percent in October, and 6-7 percent by the end of the year. The NBP chief expressed the hope for inflation to eventually reach 5 percent or less. However, Glapiński acknowledged that achieving this could prove challenging due to global expectations of persistent inflation at that level.
Glapiński also addressed concerns from banking analysts regarding the interest rate cut, noting that high interest rates are beneficial to banks. He explained that the MPC made the decision based on a combination of factors, including the faster decline in inflation and slower GDP growth than expected. The NBP now projects weaker GDP growth in 2023, potentially at the level of 0 percent. Glapiński also commented on the recent depreciation of the Polish zloty following the rate cut, stating that a 2-percent depreciation would not have an immediate impact on inflation. However, he expressed the hope that the zloty would stabilize at a level reflecting Poland’s economic fundamentals, as a strong currency helps combat inflation.
Regarding future monetary policy decisions, Glapiński stated that he would follow the stance of Christine Lagarde, the ECB chief, who emphasizes the importance of monitoring developments and making decisions accordingly. The governor noted that once inflation has been confirmed to be declining towards 5 percent and lower, further interest rate cuts may be implemented. He concluded by stating that the recent 75-basis point rate cut was a significant adjustment and future actions would be based on the assessment of the situation.