By Pawel Florkiewicz
WARSAW (Reuters) – July is a very safe moment to cut interest rates in Poland, Monetary Policy Council (MPC) member Ireneusz Dabrowski said, although he did not rule out that the decision could be made earlier and added that wage data would be key.
“The decision to cut rates may come sooner, but in my opinion July is a very safe moment. Any earlier carries a certain risk, but perhaps the Council will decide to do so and there will be a proposal on this matter,” Dabrowski told Reuters.
Poland’s main interest rate has been at 5.75% since October 2023, but central bank governor Adam Glapinski has said this month that policy easing could come as soon as May due to a lower than previously expected outlook for inflation.
Some other MPC members are also inclined to start the monetary policy easing cycle quickly, perhaps as early as next month.
“I see that disinflation processes are faster than assumed in the March projection. However, I do not know if they are fast enough for this decision to happen in May. But undoubtedly, compared to the previous month, the Council’s willingness to cut interest rates has increased,” Dąbrowski said.
Among the factors that increase the uncertainty of monetary policy, Dabrowski mentioned the impact of U.S. customs policy on the Polish economy, as well as the expectation that the government will decide to lift an energy price cap in the fourth quarter, which would affect inflation.
The MPC member said that in his opinion wage data are key to making a decision on interest rate cuts.
“If the inflation target is 2.5% and labor productivity is 3-4%, then the safe rate of wage growth is around 5-6%, and at the moment it is at an estimated level of around 8%, so we are close. We are waiting for this data,” told Dabrowski.
The council member also said that in his opinion, if the Monetary Policy Council decided to ease monetary policy, it should initially be an “adjustment” move.
“Which does not rule out that (a cycle) could start later, but we will have to wait until the July projection to test this adjustment,” told Dabrowski.
(Reporting by Pawel Florkiewicz; Editing by Toby Chopra)
