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Poland Has Little Room for Big Cuts in 2025, Central Banker Says - BLOOMBERG
(Bloomberg) -- Poland has little room for significant interest rate cuts next year with wages and consumer prices buoying inflation and economic growth accelerating, the country’s deputy central bank chief said.
Marta Kightley, who works closely with Governor Adam Glapinski, said Poland’s economic landscape has altered since last year, when the central bank slashed the benchmark rate by a total of 100 basis points to 5.75%.
“At that time, inflation was falling very sharply, and macroeconomic data was worse than we had expected,” Kightley, who is not a member of the rate-setting Monetary Policy Council, said in an interview in Warsaw. “Now this picture is completely different.”
The central banker pointed to continued double-digit wage growth and an acceleration in consumer prices as the main reasons for the decision by policymakers to keep rates unchanged. The National Bank of Poland has kept borrowing costs steady since October 2023, citing persistent uncertainties over energy prices, wages and fiscal policy.
Kightley expects an average inflation rate of 4.8% next year, assuming that Prime Minister Donald Tusk’s cabinet follows through with its proposal to extend energy price caps for the first nine months of 2025. Should the government fail to do so, that figure could rise to 5.6%, she said.
Price levels would be poised to recede to around 3.5% at the end of 2025, if the energy price cap were to be binding throughout the year, Kightley said.
“A lot of unexpected things can still happen,” she told Bloomberg News. “It’s difficult to assess how significant the room is for rate cuts next year, although it’s worth noting that there’s rather no room for large reductions.”
The potential for faster inflation is the central factor that could delay rate cuts, with policymakers keeping a particularly keen eye on wage growth. Loose fiscal policy by Tusk’s government also limits the prospects of easing, Kightley said.
“We see warning signs all the time,” she added.
Inflation is likely to peak by March, when rate setters will have a clearer picture of the pace of any inflation reduction — though an immediate rate cut may not be on the table, the deputy director said. Her estimation is more cautious than other policymakers, who expect a discussion on rate cuts to start in March.
“It is difficult to say at this point whether the expected discussion of an interest rate cut in March will actually be justified at that time, let alone whether it will translate into a decision to ease monetary policy,” the deputy governor said.
