Poland’s central bank plans to maintain its benchmark interest rate this year due to persistent inflation risks, with a possibility of gradual easing only beginning in 2025. This announcement comes from Iwona Duda, a member of the central bank’s Monetary Policy Council.
Duda stated that policymakers will start discussing potential rate cuts towards the end of this year. She emphasized that the current rate of 5.75% is appropriate given the economic conditions and warned against any hasty policy changes that could pose risks.
“We will consider rate cuts very gradually while closely analyzing all conditions,” Duda told Bloomberg News during an interview in Warsaw. She added that it is too early to determine the extent of possible rate cuts in 2025. The National Bank of Poland has maintained its main rate since last autumn, following an unexpected 75 basis-point cut in September and a subsequent quarter-point reduction in October, just before the country’s October 15 election. These surprise moves led to a selloff in the zloty and sparked criticism that Governor Adam Glapinski was attempting to aid his nationalist allies in the Law & Justice party during the election.
Prime Minister Donald Tusk, who secured a majority to remove the nationalists from power, has targeted Glapinski politically. Glapinski has denied any misconduct and, under the new ruling coalition’s scrutiny, has insisted that rate cuts will remain on hold through the end of the year, despite decreasing inflation.
Duda highlighted that the rate-setting panel considers wage growth and uncertainties surrounding food and energy prices as significant risks to inflation this year. Nonetheless, she sees no justification for raising rates further.
Inflation, which slowed to 2% in February, might rise to around 5.5% by the end of the year due to the reinstatement of a food tax last month and the partial removal of energy price caps starting in July, Duda explained.
Even with an expected rebound in industrial output that could boost economic growth beyond 3% in 2024, core inflation is likely to remain just above 4% by the end of 2024, according to Duda. She noted that slower inflation, rising wages, and low unemployment would drive domestic demand, painting a positive outlook for Poland’s economic prospects.
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