Poland likely to start cutting interest rates at end-2023

According to Glapiński, inflation will be under control in 2023 and will drop to around 6 percent. Rafał Guz/PAP

The governor of Poland's central bank has announced that Poland seems to be getting closer to the end of the monetary policy tightening cycle rather than to its beginning.

"It cannot be ruled out that (the Monetary Policy Council, RPP - PAP) will start cutting interest rates in the last quarter of 2023," Adam Glapiński told reporters on Thursday and added "we expect inflation to stabilise in summer and, later, to start slowly going down."

On Wednesday, RPP, the Polish central bank's rate-setting body, increased the reference interest rate by 75 basis points (bps) to 6.00 percent.

The National Bank of Poland's lombard rate was also raised from 5.75 percent to 6.50 percent, the rediscount rate from 5.30 percent to 6.05 percent, and the discount rate from 5.35 percent to 6.10 percent.

At the same time, the RPP also increased the deposit rate from 4.75 percent to 5.50 percent.

The latest hike is the ninth in a row, and is seen by economists as a reaction to rising inflation and the weakening national currency.

Glapiński said that the aim was to permanently lower inflation, and to cut interest rates "when the time comes."

He admitted that that inflation was much higher than desired but added that it had mainly resulted from the growth of energy raw materials prices as well as of agricultural products.

"Unfortunately, the war in Ukraine, Russia's gas policy conducted before the war, the EU's energy policy and, above all, a permanent growth of electricity prices have increased prices of many raw materials," he said, adding that this was the main cause of inflation.

According to Glapiński, inflation will be under control in 2023 and will drop to around 6 percent.

The NBP governor also stated that, apart from inflation, the Polish economy was in very good condition. "Poland's GDP grew by 8.5 percent in Q1 2022," he said, adding that this was a very fast growth.

The prices of consumer goods and services (Consumer Price Index, CPI) increased by 13.9 percent year on year, and by 1.7 percent month on month in May 2022, according to the Central Statistical Office (GUS).