(Bloomberg) — Poland’s central bank is expected to keep borrowing costs unchanged despite latest signs of economic weakness as policymakers are wary of inflation accelerating later in the year.
Most Read from Bloomberg
The Monetary Policy Council will leave the benchmark rate at 5.75% for a seventh consecutive meeting on Thursday, according to all 27 economists surveyed by Bloomberg. Central bank Governor Adam Glapinski said last month he won’t bend to pressure to reduce borrowing costs as the higher tax on food and potential end to energy price cap could reignite inflation.
Finance Minister Andrzej Domanski said last month that lower rates would help the budget and the economy. But only a minority of policymakers inside the 10-member MPC is advocating for a return to rate cuts once it’s certain that the government’s energy price plans don’t rekindle inflation expectations.
The reduction in energy subsidies would temporarily bump up prices, according to Domanski, who predicted inflation of 4.5%-5% at the end of the year.
MPC member Henryk Wnorowski said that the cabinet’s plan to keep a lid on energy prices increases the likelihood of rate cuts, while Ludwik Kotecki said soft economic data is gradually tilting the rates debate toward easing.
Investors will look for any change in the outlook for rates at Glapinski’s monthly news conference, which is scheduled at 3 p.m. in Warsaw on Friday. Since outsize rate cuts ahead of a general election last October, the governor has turned hawkish, regularly citing inflation risks as an obstacle in further rate cuts.
“It will be difficult for the MPC to justify continued hawkish rhetoric but the overall picture is not unambiguous,” Bank PKO BP chief economist Piotr Bujak said, citing long-term inflation risks from energy prices.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.