(Bloomberg) -- Polish policymaker Przemyslaw Litwiniuk sees a majority in the Monetary Policy Council willing to start reducing interest rates as early as next March, although he won’t back reductions until later.
Litwiniuk said in an interview that he interprets Governor Adam Glapinski’s recent comments as paving the way for the 10-person MPC to begin debating rate cuts as early as March — and believes the panel could pull the trigger already that month.
“The majority of the Council would allow for monetary easing when there is an outline of a path of sustained disinflation with the prospect of entering the target range,” Litwiniuk told Bloomberg. “We expect to see such a path in the March projection at the earliest.”
The central bank is targeting inflation of 2.5% with a tolerance of plus/minus one percentage point. Glapinski unexpectedly signaled this month that rates may be lowered around the middle of next year after earlier indicating no easing until 2026.
Since the governor’s comments, a number of analysts have brought forward their rate-cut expectations, with Poland’s unit of Citigroup Inc. expecting 100 to 150 basis points in easing next year. Derivatives show bets on roughly four or five quarter point reductions over the next 12 months.
Hawkish Tilt
For Litwiniuk, cutting rates in the first quarter of 2025 would be too early, especially as he expects inflation to peak at more than 6% during the first three months of next year.
“I believe that the first rate cut could take place after the July projection, if the Council gains confidence that the disinflation path is stable, steep and heading toward the target in the medium term,” he said.
However, deeper monetary easing by the Federal Reserve and the European Central Bank may strengthen the zloty, he said. This may in turn accelerate rate cuts in Poland, Litwiniuk said, echoing remarks from his colleague Henryk Wnorowski.
The scale of Poland’s monetary easing will depend on the expected pace of disinflation. If the adjustments take place during a period of “significantly” positive real rates, they should be made “in steps, and not small steps, which means at least 50 basis points each,” Litwiniuk said.
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