Poland’s central bank may deliver one of the last rate increases of this monetary tightening cycle as it shifts the focus from fighting inflation to avoiding an economic downturn.
(Bloomberg) — Poland’s central bank may deliver one of the last rate increases of this monetary tightening cycle as it shifts the focus from fighting inflation to avoiding an economic downturn.
Policy makers will lift the benchmark rate by 25 basis points to 6.75% on Wednesday, according to 23 of 28 economists surveyed by Bloomberg, making it the 11th straight increase from near zero.
Central bank Governor Adam Glapinski said last week that borrowing costs will rise once or twice more and only in quarter percentage point steps.
Ludwik Kotecki, a policy maker, said the governor told members of the Monetary Policy Council he will file a motion for a hike at the meeting on Wednesday. Glapinski will comment on the decision at a news conference at 3 p.m. in Warsaw on Thursday.
While inflation remains at the highest in almost 26-years, the central bank is predicting that it’s going to start edging lower in the coming months as economy cools.
Gross domestic product dropped in the second quarter by 2.3% from the previous three-month period and a manufacturing gauge fell for the fourth straight month.
Glapinski said in July that a technical recession — two consecutive quarters of declining output — could occur this year.
Still, the central bank needs to keep its options open and will be reluctant to rule out further interest rate increases, he told Business Insider in Aug. 29 interview, until it has more clarity on energy prices and the scale of support the government is going to offer to households.
Economists at PKO Bank Polski SA expect a cautious rate increase, “given the less inflationary structure of economic growth and the sharp deceleration in manufacturing.”
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