(Bloomberg) -- Poland is set to keep interest rates unchanged after inflation climbed to a fresh 2024 high in September.
The Monetary Policy Council will on Wednesday hold its benchmark at 5.75% — the level where it’s been since last October, according to all 35 economists surveyed by Bloomberg. The decision comes after regional peers in the Czech Republic and Hungary both reduced rates by a quarter-point each.
Poland’s reluctance to join the wave of monetary easing across the globe is helping buoy the zloty but comes at the cost of higher yields for the government. The country is struggling to reduce the budget deficit amid a massive defense spending spree due to the war in neighboring Ukraine.
The cabinet’s moves to reduce costly energy subsidies and reimpose the full value-added tax on foods have fueled an increase in Polish inflation in recent months. The consumer price index has spiked to 4.9% in September, well above the central bank’s 1.5% to 3.5% tolerance band.
Governor Adam Glapinski has said that rates could be lowered next year only if the peak of inflation has passed and central bank projections envisage price growth receding sustainably. A number of policymakers suggested that cuts may be discussed by the MPC as early as March.
“Despite the MPC’s recent shift to a more dovish stance, it is still far too early to cut rates,” said Pekao economists led by Ernest Pytlarczyk. They expect Glapinski to strike a “cautious” tone during his monthly news conference on Thursday.
The rate decision coincides with a meeting of the parliamentary committee in charge of investigating Glapinski’s actions. The panel is expected to take testimony from its first witnesses on Wednesday. The governor has repeatedly denied any wrongdoing, criticizing the probe as “unjustified” and eroding the independence of the National Bank of Poland
Prime Minister Donald Tusk’s government has accused the governor — an ally of the previously ruling nationalists — of politicizing monetary policy, misleading the government over central bank profits as well as irregularities in its bond buying programme.
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