WARSAW (POLAND) – Poland’s central bank could cut interest rates during the first quarter of next year and may intervene to weaken the zloty, the bank’s governor said, undermining previous expectations for stable borrowing costs until 2022.
The comments on rate cuts, which appeared in excerpts late on Tuesday on Twitter and on the financial news website Obserwator Finansowy, ran counter to statements governor Adam Glapinski made as recently as this month that rates would remain at a record low of 0.1% for a long time.
“The current level of interest rates is appropriate and best suits the current situation,” Glapinski said.
“However, in the first quarter of next year, further rate cuts are possible,” he added. “We are conducting the appropriate analyses of the possible circumstances and potential effects of such a reduction at the NBP (National Bank of Poland).”
Analysts polled earlier in December expected rates to hold steady until the fourth quarter of 2022.
On Wednesday, other bankers leant weight to the possibility of a cut.
Central banker Jerzy Zyzynski told a cut to zero was possible in the first quarter, citing a “sluggish” recovery.
Fellow rate-setter Rafal Sura told the Polish agency PAP further cuts could not be ruled out in the future, although he did not currently see a need.
In an excerpt published on Wednesday, Glapinski said the central bank may intervene to weaken the zloty to help exports and boost the economic recovery from the COVID-19 pandemic.
Already, on Dec. 18, a source close to the bank said it intervened to weaken the zloty.
On Tuesday afternoon, the zloty weakened by as much as 1.77%, causing speculation of a further intervention.
“The recent pressure to increase the value of the zloty is very worrying and very damaging,” Glapinski was quoted as saying.
“With our inflation projections at a low level next year, this obviously creates room for possible decisive central bank interventions.”