Polish central bank in wait-and-see mode, says governor

The National Bank of Poland (NBP) will wait until its next inflation projection in November before deciding if more policy tightening is needed, its governor said on Thursday, after the Monetary Policy Council (MPC) decided to leave rates on hold.

Wednesdays decision to leave the main interest rate at 6.75% followed a run of 11 consecutive hikes, and left markets wondering if the move marked the end of the cycle or if policymakers were merely taking a break.

“This is a pause in the rate-hike cycle, but not the formal end of the rate-hike cycle,” Adam Glapinski told a news conference.

“In November another inflation report will be published, which … is the most important document that allows one to look at the coming quarters in the best way.”

Glapinski reiterated his view that inflation in Poland was mainly caused by external factors, but said there were signs that shocks in commodity markets that had fuelled price growth were easing and that he expected inflation to fall in 2023.

The Polish zloty softened as Glapinski spoke, and was down 1.36% against the euro at 1500 GMT.

“Theoretically, the NBP governor is declaring that this is not the end of the rate-hike cycle, but the zloty has weakened since the beginning of the conference, as many other comments from the governor indicate that the end is near,” ING analysts said on Twitter.

“We hear a lot about disinflationary factors, but little about inflation risks, which can be worrying.”

The Polish decision to leave rates on hold came as other central banks in central Europe had signalled an end to their policy-tightening cycles.

In Hungary the central bank raised its base rate by a larger-than-expected 125 basis points to 13% in September but said it was ending its rate-hike cycle amid a slowing economy, while in the Czech Republic policymakers kept rates steady at 7.00% for a second time in a row.