WARSAW (Reuters) – Further interest rate hikes in Poland in the current cycle may not be necessary if the economy moves in line with the estimates included in the November inflation projection, central banker Henryk Wnorowski said.
At its November meeting the Monetary Policy Council (MPC) kept its main interest rate at 6.75% for the second month in a row, and National Bank of Poland (NBP) Governor Adam Glapinski said the rate hike cycle was being paused but could continue.
“In my opinion, it cannot be unequivocally declared that this is the end of interest rate hikes. However, I think it may be the end of this cycle, given the favourable circumstances and a high probability that the scenario from the November projection will come true,” Wnorowski told Reuters in an interview.
The new central bank inflation projection shows that inflation in Poland will not return to the NBP’s target range of 1.5%-3.5% until the third quarter of 2025.
“If it is correct, there may be no more hikes, although I would like to stress that the Council is still focused and determined to fight inflation,” he added.
“Our break proves that we do not want decisions on further hikes which would perhaps speed up the pace of reaching the target but result in costs that are too high,” Wnorowski said.
While he believes Poland is not heading for a recession, GDP growth forecasts are low.
“There are many indications that the first quarter of 2023 will see a decline in GDP, mainly due to the base, a very good first quarter of 2022. But whether 0.7%, 1% or 1.2%, these are still not very comfortable growth forecasts, he said.
Wnorowski said he expects inflation to peak in the first quarter, in March, at between 19-20%, and then the rate of price growth should slow down significantly.
“Once we record the first reading on the other side of the ‘inflation hill’, the pace of its decline will be fast. Personally, I hope that next year inflation will be lower than in the projection, where it was 13.5%,” he said.
“However, a descent to single-digit inflation next year is unlikely,” he added.
Polish inflation hit 17.9% in October, continuing to rise on soaring energy prices.
(Reporting by Pawel Florkiewicz; Editing by Susan Fenton)
