Polish Senate Gives Central Bank Hawkish Nudge With Confirmation 

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Poland’s Senate confirmed two new members of the central bank’s rate-setting council, marking a shift in the 10-member body toward more aggressive tightening as eastern Europe’s largest economy grapples with inflation at a two-decade high. 

Ludwik Kotecki and Przemyslaw Litwiniuk were approved by the upper house of parliament in Warsaw on Wednesday for six-year terms. Their first meeting on interest rates is due on Feb. 8, when a 50 basis-point borrowing-cost increase has already been signaled by the central bank’s governor, Adam Glapinski.  

The two will replace Jerzy Kropiwnicki, viewed as a moderate on monetary policy, and Eugeniusz Gatnar, who has been a vocal supporter of rate increases, notably before Glapinski and his allies held off on monetary tightening until last October. 

Poland’s new rate-setters were confirmed with votes of the parliamentary opposition, many of whom have heaped criticism on Glapinski for playing down the threat of inflation for too long and accuse him of taking action too late. 

Poland’s top central banker has also come under fire as a close ally of Jaroslaw Kaczynski, the leader of the ruling Law & Justice party, potentially jeopardizing the body’s independence. 

Polish rate setters on Jan. 4 kicked off a global round of rate hikes for 2022 with an increase in its benchmark by 50 basis points to 2.25%, the fourth consecutive monthly hike. The next day, Glapinski said he would favor at least one more rate hike of 50 basis points, arguing that the benchmark could “safely” end the tightening cycle at 3% or even 4%. 

Kotecki, who previously served as deputy finance minister and Poland’s representative at the International Monetary Fund, has warned that more tightening may be needed as inflation is at risk of exceeding 10%. 

Litwniuk, a professor of law and public finances at the Warsaw School of Agriculture, also supports raising rates further, while calling for close cooperation between the central bank and the government in order to contain inflation. 

“We see the risk of a slightly larger rate hike in February, by 75 basis points, taking into consideration higher than expected inflation and two new” members, according to Citigroup economist Piotr Kalisz. “They can change the distribution of votes to a bit more hawkish.” 

Glapinski has said future rate moves will ultimately be determined by incoming policy makers. Four other members of the rate-setting council will leave after the February meeting, while Jerzy Zyzynski will end his term in March. 

Earlier Wednesday, the lower house of parliament proposed two candidates to replace members whose terms end in early February: Law & Justice lawmaker and former Deputy Finance Minister Wieslaw Janczyk -- and Elzbieta Ostrowska, an economics professor at Gdansk University. Neither have experience in monetary policy. 

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