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(Bloomberg) — Poland’s central bank Governor Adam Glapinski said the likelihood of interest rate increases has grown over the past month although a hike is not a forgone conclusion for policymakers.
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Glapinski’s Monetary Policy Council left its benchmark unchanged for a second straight month on Wednesday, citing a tense geopolitical situation in the Middle East that’s caused uncertainties for the Polish economy.
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“Rate hikes are likely but they may not occur,” Glapinski told a news conference on Thursday. On the other hand, “rate cuts are very unlikely.”
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The comments mark a further tilt toward hawkish rhetoric by Polish policymakers, who cut interest rates in the first days of the Iran war and quickly switched to a wait-and-see stance. The benchmark rate stands at 3.75%, down 200 basis points over the last 12 months.
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Poland’s headline inflation jumped to 3.2% in April, near the 3.5% upper limit of the central bank’s target range. Adding to the concerns, the April readout of S&P Global manufacturing purchasing managers’ index for Poland showed input prices increasing at their fastest pace since 2022.
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Glapinski sounded “more hawkish” at his monthly news conference, said Grzegorz Maliszewski, chief economist at Bank Millennium SA. “If the conflict in the Middle East drags on and energy commodity prices remain high, interest rate hikes will become a more likely prospect.”
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The governor said the current supply-side energy shocks are much smaller than those felt by Poland in 2022, following Russia’s full-scale invasion of neighboring Ukraine.
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Poland’s job market is also looser than in past years, and Glapinski said that the increase in inflation hasn’t affected wage growth. Furthermore, the zloty has been steady during the Iran conflict, the governor said.
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The Polish currency advanced 0.2% against the euro on Thursday to the highest level since April 20, benefiting from a rally in emerging-market assets stoked by expectations that the Middle East conflict could end soon.
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Glapinski said he’s not an optimist when it comes to a quick path toward peace in Iran and that the 10-member MPC must stay vigilant.
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“The Council requested that I assure you that it won’t hesitate to take swift action — including an interest-rate adjustment — should inflation take an adverse turn, which unfortunately is a possibility which can’t be ruled out,” he said.
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