WARSAW (Reuters) -Inflation in Poland should start slowing sharply after the first quarter and could fall to an annual rate of 6% by December, but it is still too early to talk about rate cuts, Central Bank Governor Adam Glapinski said on Thursday.
He spoke a day after the National Bank of Poland left its main interest rate unchanged at 6.75%, as expected, the fifth month in a row, remaining in wait-and-see mode as it assesses the damage to the economy caused by the war in Ukraine.
“We view the current level (of rates) as appropriate,” Glapinski said, adding the bank would be closely watching inflation data for January and February.
“We do not believe inflation is under control… It is too early to discuss rate cuts.”
Inflation in Poland stood at an annual rate of 16.6% in December and the central bank expects it to rise further in the first quarter before it starts falling.
“I personally expect that in December… inflation may be 6%,” Glapinski said.
Analysts said that despite Glapinski stressing that the bank has not officially closed its rate hiking cycle, limited rate cuts in the second half of the year could not be excluded.
“In our opinion, this communication indicates that the drop in CPI inflation alone, even with persistently high core inflation, may be a serious argument for starting a discussion about cuts” – ING analysts said.
“We see increasing chances for some initial rate cuts before the end of 2023.”
Other central banks in the region have ended tightening cycles they started in 2021. Romania’s central bank kept its benchmark interest rate on hold at 7.0% on Thursday, the first pause after a 16-month hiking cycle as it expects inflation to fall.
(Reporting by Alan Charlish, Anna Koper, Pawel Florkiewicz, Anna Wlodarczak-Semczuk; Editing by Christina Fincher, William Maclean)
