Majority of Poland’s Central Bankers Favor December Rate Hike

Dorota Bartyzel

22 Nov 2021, 03:17 PM IST

(Bloomberg) --

Poland looks set to raise interest rates next month, with more than half of the central bank’s policy committee in favor of bringing borrowing costs to pre-pandemic levels soon.

The apparent consensus appears to trail market bets for lifting the benchmark past the 1.5% level where it stood for half a decade until the virus hit. But it’s still a rare event in a country where the debate over rates often touches off a public cacophony of wildly varying arguments from the 10-member Monetary Policy Council.

Interviews with six of the 10-member panel, along with public remarks from the remaining four, show a clear majority supporting more action to tame inflation after it surged to a two-decade high. The next decision -- which will follow two surprise hikes that lifted the benchmark interest to 1.25% -- is due on Dec. 8.

“Comments from MPC members over the last week, including Governor Adam Glapinski, Lukasz Hardt, Kamil Zubelewicz and Eugeniusz Gatnar, point that a hike in December is very likely,” said Piotr Bujak, chief economist at bank PKO Bank Polski SA. “The target level for the reference rate might be lower than expected by the financial market, though. In our view it’s 2%-3%.”

These six MPC members favor tightening soon
Poland Should Bring Key Rate to 1.5% Soon, Central Banker Says Polish Key Rate Hikes Past 1.5% May Be Needed, MPC’s Sura Says Poland’s Zubelewicz Calls for Rate at 3% to Help Curb Inflation Poland Must Hike If Inflation Tops Outlook, Ancyparowicz Says Polish MPC’s Hardt Sees High Likelihood of Rate Hike in December Gatnar: Polish Central Bank Should Continue Normalizing Rates

Of the six who favor tightening soon, Gatnar and Zubelewicz are among the most hawkish, with the former calling for hikes of 50 basis points in December and January and the latter saying the key rate should rise to 3% by February, when four of the MPC members will be replaced.

Glapinski also falls into this group. After the zloty dropped to a 12-year low against the euro last week, he said that “in the conditions of the current high inflation, further depreciation of the zloty would not be consistent with the National Bank of Poland’s interest-rate policy.”

On the other side of the argument are Poland’s usual doves. Eryk Lon, whose term ends on Feb. 9, said he hoped the rate increases in October and November would suffice, and that he’d tolerate elevated inflation as typical in an emerging economy like Poland.

Other members were less sure but still leaning on the side of no action, with Jerzy Kropiwnicki saying he still can’t say how he’ll decide and Cezary Kochalski proclaiming that the tightening moves done so far needed to be given time to work their way through the economy.

These four oppose tightening soon or aren’t sure
Polish Hikes Adequate for Now to Fight Inflation, Kochalski Says 20-Year-High Inflation Won’t Sway Poland’s Lon to Embrace Hikes Poland’s Kropiwnicki May Not Back Hikes in Dec. and Jan.: PAP Polish Governor: Current PLN Level Not Seen as Pressure to Hike

Glapinski said after the Nov. 3 hike that a rate increase in December was more likely than leaving the rate unchanged. Last week he repeated his pledge to do “whatever it takes” to bring inflation back toward the target in the medium-term.

Investors are betting via forward-rate agreements showing expectations for more than 1 percentage point in hikes over three months.

“The MPC’s communication still represents the main source of uncertainty about the timing and the size of incoming decisions,” said Grzegorz Maliszewski, chief economist at Bank Millennium.