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(Bloomberg) — Poland will likely abstain from interest-rate cuts for as long as the armed conflict in Iran lasts, according to policymaker Henryk Wnorowski.
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The Monetary Policy Council cut its benchmark by 25 basis points to 3.75% on Wednesday, while lowering its inflation projections.
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“We must definitely forget about further downward adjustments to interest rates for as long as the war continues,” MPC’s Wnorowski told Bloomberg News. “The end of the war will reopen the possibility of returning to discussions about interest rate cuts.”
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The longer the war lasts, the more difficult it will be to assess the impact on Poland’s inflation and economy, and possibly resume cuts, he added.
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The 10-member MPC’s decision to reduce rates this week was partly based on concern that leaving them unchanged would send another worrying signal to financial markets, which were already shaken by war in the Middle East, Wnorowski said. He also played down expectations for one of two more quarter-point rate cuts this year.
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“As for the target rate for 2026 – the likelihood that it will reach the 3.25%-3.5% level that was recently reported in the media has decreased dramatically,” Wnorowski said.
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Central bank Governor Adam Glapinski said the outlook for Polish borrowing costs was blurred by the conflict in the Middle East, which he expected to “last longer” than what he called the optimistic scenario of four to eight weeks.
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Wnorowski said the spike in global energy crisis could still revive Polish inflation above the central bank’s target of 2.5%, which means that policymakers must stay cautious and can’t rule out any scenario, including a rate hike. In January, consumer price growth slowed to 2.2%, the lowest level in almost two years.
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“The wait-and-see approach is now more justified than it has been in past months,” Wnorowski said.
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