Poland's key interest rate should rise to 7.00%, says c.banker
Adds quotes on 'wait-and-see' policy and possible rate cuts, background
WARSAW, March 22 (Reuters) -Poland's main interest rate should rise to 7.00% in order to effectively tackle inflation, central banker Przemyslaw Litwiniuk said on Wednesday.
Despite inflation that is deep in double-digit territory, most analysts expect the main rate to stay on hold at 6.75% until the end of 2023 as the central bank assesses the extent of an economic slowdown caused by the war in Ukraine.
"In the Budget Act, the government assumed an interest rate of 7.00% and I agree with the government," he told news website Gazeta.pl.
Although the central bank has not officially declared the end of the tightening cycle it started in 2021, it has entered 'wait-and-see' mode and Governor Adam Glapinski has said that he regards further hikes as "less and less likely".
"'Wait-and-see' is an optimistic policy... but I am less optimistic and believe that higher rates would provide a steeper disinflation path," Litwiniuk said.
Inflation in emerging Europe's largest economy hit 18.4% in February in part due to soaring food prices.
While most economists agree that this represents the peak of the current cycle of inflation, the central bank's latest projections do not show price growth returning to its target range of 1.5-3.5% until 2025.
Asked if he thought rates could be cut before 2025, Litwiniuk said he saw "no such chance".
"A reduction in interest rates would lead to a rise in the future disinflation curve," he said.
Reporting by Alan Charlish and Pawel Florkiewicz; Editing by Bernadette Baum
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.