Marek Belka Courtesy of the International Monetary Fund

Following the announcement by the Central Statistical Office that the Polish economy grew by 2.4 percent year-on-year in the second quarter of this year, compared to 3.5 percent in the first quarter, economists have started suggesting that an interest-rate cut could be in the cards.

“[The] economic outlook for the upcoming quarters is deteriorating, so it seems that the Monetary Policy Council should not wait with monetary easing and may withdraw from May’s controversial rate hike as early as in September,” Bank Zachodni WBK wrote in a statement after the GDP announcement.

Citi Handlowy analysts meanwhile wrote in a report that the GDP and other recent negative data could lead to a “gradual softening of the [Monetary Policy Council’s] tone and it could even possibly allow the Council to change its official statement by signaling a shift towards neutral (or easing) bias as soon as in September.”

The bank added that the change in the bias wouldn’t imply imminent rate cuts but would make them “more likely,” adding that it expected the first cut to be delivered in January with a risk it could happen “as soon as in November-December.”

It also predicts rates will fall by around 100 basis points over the next 12 months.
Marek Belka, the president of the National Bank of Poland, said in late August that a reduction in interest rates was more likely than an intervention in the currency market, which has also been suggested.

“The atmosphere has changed, as has the attitude of the Monetary Policy Council … today we are talking about a possible lowering and not an urgent need to raise interest rates,” said Mr Belka.

On the matter of the złoty, Mr Belka said the Polish currency was “nearing its fundamentals” and that there would be no intervention on its behalf in the near future. But it is unclear for how long the NBP head will maintain this stance since the situation on the ground has changed fast, with the złoty depreciating in value rapidly after the GDP numbers were announced.

On August 31, the Polish currency was worth 4.16 against the euro at the close of trade.