MNI INTERVIEW: NBP Should Hold Rates, Keep Out Of Politics

The credibility of the National Bank of Poland would be improved were moves to oust current head Adam Glapinski successful, former chairman Hanna Gronkiewicz-Waltz told MNI, adding that it should keep its reference rate unchanged at 5.75% for a sixth successive meeting next week, and remain on guard while core inflation remains elevated.

While there are upside risks to headline inflation from the reintroduction of value-added tax on food from April 1, “the key is core inflation, which is the only inflation controlled by the Bank,” Gronkiewicz-Waltz, who led the central bank from 1992-2000, said in an interview. (See MNI INTERVIEW: NBP Rate Hold "Short-Sighted" - Ex-Governor)

“At the moment I would wait because core inflation is higher than the CPI. A projected inflation rate of 3.5% next year sounds okay, but it is important to follow the trend,” she said.

“It also needs to be remembered that in Poland interest rates of the central bank do not play the same role as in other countries because as a post-emerging economy we also have a lot of excess liquidity, because of new flows of money from inward investors,” she said.

Gronkiewicz-Waltz considers the NBP erred badly last September with what she described as a politically-motivated 75bp cut to the base rate to 6.0% when inflation was running close to 10%. While overall inflation has since fallen, with NBP projections putting it at 2.8 – 4.3% in 2024, 2.2 – 5.0% in 2025 and 1.5 – 4.3% in 2026, the decline in core inflation has lagged that in CPI.

MOVE AGAINST GLAPINSKI

She welcomed this week’s announcement of moves by the government led by Civic Platform’s Donald Tusk to begin the process of bringing current NBP Chairman Adam Glapinski before a state tribunal, with a view to his eventual removal. (See MNI INTERVIEW: Polish CenBank Ignores Core Data-MPC's Tyrowicz)

While ECB President Christine Lagarde advised Glapinski, who has denied allegations of wrongdoing, to refer any resolutions affecting his duties to the European Court of Justice, Gronkiewicz-Waltz, herself a former Civic Platform politician and a professor of jurisprudence, noted that Glapinski had used his position to benefit the previous Law and Justice Party government. He had also effectively engaged in political activity by putting up banners outside the central bank building suggesting that those who criticise the central bank or the government for high inflation are enemies.

“He was not independent from the previous government. He supported them in every election,” she said, adding that central bank independence also means “the independence of the central bank from individuals who are not themselves independent.”

Removing a sitting governor will be difficult, “but if you look at the ECB, at any other Eurosystem central bank, the Fed, or the Bank of England, you can be dismissed under certain conditions,” she said.

Even were Glapinski to leave the NBP, it will take time before the six-year terms of the Law-and-Justice supporters who make up the majority of both the bank’s Monetary Policy Council and its Management Board have all expired, Gronkiewicz-Waltz noted.

“They do what the governor wants them to do. It’s pure cronyism. When I was governor I nominated people who already had important roles within the bank or were outside the bank but had a postdoctoral degree in central banking.”

Asked who might replace Glapinski, Gronkiewicz-Waltz declined to comment. But, she said, “I am sure that Tusk will want to nominate someone who is not politically connected.”