Poland’s Least Talkative Central Banker Breaks Silence on Rates

(Bloomberg) --

Central banker Jerzy Kropiwnicki, absent from Poland’s last two monetary-policy meetings because of illness, quickly extinguished any lingering suggestions he’d team up with a minority of his colleagues angling for an interest-rate hike.

Two of the 10-strong Monetary Policy Council had sought to raise record-low borrowing costs in July, ending an unprecedented pause. The concern stems from consumer-price growth hitting a seven-year high and forecasts that it will climb further.

But for Kropiwnicki, who speaks less publicly than other MPC members and last gave an interview in April, the data so far aren’t compelling enough to change tack.

“As long as inflation is purely cost-related, its level isn’t threatening the economy -- I wouldn’t support the hike motion,” he said Tuesday in an interview in Warsaw. “Since the MPC has no impact on food or energy prices, and the economy is clearly slowing, putting rates on hold is the best solution.”

Kropiwnicki’s stance bolsters the position of Governor Adam Glapinski, who favors keeping the central bank’s benchmark at a 1.5% for the foreseeable future. Despite the surge in inflation, there are grounds to hold steady: the global economy is slowing, while the world’s major central banks are striking a more dovish tone.

Raising rates could also prove controversial as the government seeks re-election in the fall.

Kropiwnicki could be persuaded to shift his view.

“Since higher costs may eventually raise inflationary pressure, I’d see inflation expectations growing in importance,” he said. “They’re staying stable now, but if inflation gets rolling, expectations may actually become more important than direct sources of price growth.”

Kropiwnicki sees the deterioration in Germany’s economy weighing on Poland next year, though not to the extent that would require lowering interest rates. Growth, which has been hovering around 5% for two years, may ease to 2.5% to 3%, he said.

Calls to loosen monetary policy could build as other central banks take that course of action to buttress their economies. Kropiwnicki vowed to do his best to withstand such pressure.

“We’ve already proved that the wisest monetary policy in our case is the policy of stable rates,” he said. “The National Bank of Poland has a good record of staying calm in hectic situations.”

To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Andrew Langley

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