Poland's central bank chief sees room for interest rate cuts this year

Poland's inflation has remained stable and within the central bank's target range for the past year, a trend National Bank of Poland (NBP) Governor Adam Glapiński highlighted as proof of the correctness of current interest rates. He expressed optimism that inflation will not exceed 3.5% this year, despite the recent reintroduction of a 23% VAT on fuel.

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Inflation has been consistent with our inflation target [2.5 percent +/- 1 percentage point] for a year. This is the best proof that the level of NBP interest rates was and is completely justified.

Glapiński cited geopolitical factors, particularly the situation in the Middle East, as a source of potential price volatility for commodities like oil. However, he believes Poland's exposure to these shocks is limited and that a significant resurgence of inflation, similar to 2022, is unlikely. The NBP projects GDP growth of over 3.5% this year and around 3% in 2027, with demand growth not expected to fuel excessive inflationary pressure.

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We are not threatened by a renewed increase in inflation like during the energy crisis after Russia's aggression against Ukraine in 2022.

Referencing the Monetary Policy Council's (RPP) current "cautious dove" stance, Glapiński positioned himself as more optimistic about potential monetary easing. He suggested that economic data and geopolitical developments might allow for an interest rate cut after the summer break. The NBP also anticipates a strategic increase in its gold reserves and noted that the Polish economy's biggest challenge is currently assessed as "tragic," though specific details were not provided in this excerpt.

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My experience and intuition tell me that it would be possible to...