Poland is ready to increase interest rates for the first time in four years if inflation risks escalate, according to the central bank governor.
Adam Glapinski said on Thursday that there’s been no indication so far that the spike in fuel prices is spreading into the wider economy, which reduced the probability of tightening taking place in November. Derivatives showed traders paring bets on hikes in the wake of the comments.
The Monetary Policy Council, headed by Glapinski, kept its benchmark unchanged at 3.75% on Wednesday. The widely expected decision came after the government capped fuel prices at the pump, which is set to reduce inflation this month from a 15-month high of 4% in September.
“If inflation risks continue to mount, the MPC is ready to act,” Glapinski told his monthly news conference in Warsaw. Asked if the panel could hike rates as soon as next month, the governor said: “Yes, even though I don’t foresee this.”
Glapinski said he sees a “strong determination” among all MPC panelists “not to miss the timing, should inflation show a tendency to spread to other sectors and take on a persistent nature.”
At the same time, the governor made clear that for now there are no signs of second-round price effects and no imminent reasons to “worry” about inflation accelerating. Having said that, Glapinski noted that global uncertainty surrounding price pressures meant that policymakers in Warsaw had to remain vigilant.
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ING Bank Slaski SA economists, led by Rafal Benecki, said Glapinski’s tone is consistent with their forecast for one or two quarter-point rate hikes in the first quarter of next year. “The probability of a hike has increased, but the MPC sees no reason for haste,” they said.
The zloty was little changed against the euro on Thursday, while the yields on two-year local-currency government bonds declined 2 basis points to 4.74%.