MNI INTERVIEW: NBP Will Cut Before 2026 - Ex-FinMin Official
MNI (LONDON) - The National Bank of Poland will cut interest rates sooner than suggested by Governor Adam Glapinski, whose announcement last week of no easing before 2026 contradicts the views of several other Monetary Policy Council members and may be politically motivated, a recent former senior government official told MNI.
“Adam Glapinski repeatedly used phrasing suggestive that he was expressing the view of a majority of Monetary Policy Committee members, he was not,” said Marek Skawinski, who served in roles including Director of Macroeconomic Policy at the Ministry of Finance between 2014 and September this year. “The remarks made by several of them since then support this conclusion. I would therefore say that the governor was speaking in part politically."
Glapinski - who has ties to the opposition Law and Justice party - has been accused by members of the ruling coalition government of lacking independence. He has denied the allegations.
“I believe that the Monetary Policy Committee will start having discussions about lowering the interest rates much sooner than in 2026. I wouldn’t want to say precisely in which quarter,” Skawinski said.
Glapinski’s remarks after last week’s monetary policy meeting prompted the Ministry of Finance to take the unusual step of pushing back publicly, noted Skawinski. He also called into question Glapinski's claim that the decision to extend a cap on household energy prices by nine months has introduced an additional source of upside risk into the inflation outlook.
“Whether the eventual unfreezing of energy support measures has a significant impact on inflation will depend on the difference between frozen prices and market prices at that point in time,” he said.
INFLATION EXPECTATIONS
“My own view is that inflation expectations are equally important: a small uptick in costs following the unfreezing of electricity prices would have a greater impact if inflation expectations are already higher. But I think that is highly unlikely.”
The cap, which costs around 0.1% of GDP, is also unlikely to be extended beyond its current September end-date as Poland seeks to stabilise its finances. That process will see fiscal consolidation equal to 0.25% of GDP in 2025, followed by an average of 1% in each of 2026, 2027 and 2028.
Reducing the deficit in four years - rather than the seven proposed by the EU - will be less pro-growth than a slower adjustment, but will further lower inflation at the same time as public and private sector pay rises gradually fall back from recent highs, and employment growth rates flatline close to zero, Skawinski said.
Backloading consolidation will help fund Poland’s plans to boost defence spending to almost 5% of GDP (See MNI EM INTERVIEW: Poland Seeks More International Bond Buyers). But it will create political as well as financial challenges for a government under pressure to deliver on 2023 election promises ahead of presidential and parliamentary polls in 2025 and 2027, according to Skawinsky.