Poland's central bank chief says further rate cuts possible in Q1

WARSAW: Poland's central bank could make further cuts in interest rates during the first quarter of next year, the bank's governor said, in a surprise change of tone that upended expectations for stable borrowing costs until 2022.

The comments, which appeared late on Tuesday on Twitter and on the financial news website Obserwator Finansowy, ran counter to statements made by Adam Glapinski 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 appropriate analyses of the possible circumstances and potential effects of such a reduction at the NBP."

Analysts polled by Reuters earlier in December expected rates to hold steady until the fourth quarter of 2022.

Central banker Jerzy Zyzynski told Reuters on Wednesday a cut to zero was possible in the first quarter, citing a "sluggish" recovery.

Fellow rate-setter Rafal Sura told PAP in an interview published on Wednesday that further cuts could not be ruled out in the future, although he did not currently see a need for them.

Sura added that he thought Poland's zloty currency should be weaker, according to PAP.

The central bank has frequently indicated in press statements that it was concerned about the strength of the zloty, which it thinks could hamper the pace of economic recovery from the COVID-19 pandemic.

On Dec. 18, a source close to the bank said it intervened to weaken the zloty.

On Tuesday afternoon, the zloty weakened as much as 1.77%, causing speculation of a further intervention. Reuters was unable to confirm if the bank had intervened.