(Bloomberg) -- Poland's appetite for monetary tightening may ease amid gains in the zloty and signs that record inflation is being contained for now, according to a top policy maker.
Wieslaw Janczyk, a new member of the country's interest-rate setting body, said the government's extension on cuts to food and fuel levies and the currency's rally were having an effect on taming inflation flirting with double digits -- and will be factored into the central bank's decision making.
“I could assume a more cautious approach to monetary policy at the next meetings,” Janczyk told Bloomberg News in his first interview as a member of the Monetary Policy Council.
As inflation has surged throughout the region, policy makers in Warsaw have delivered six straight rate increases since October, including a more-than-expected 75 basis-point bump this month to a nine-year high of 3.5%. Janczyk, a former deputy finance minister and lawmaker for the ruling Law & Justice party, said Russia's invasion of Ukraine “clearly” influenced the March 8 move.
Polish Inflation Slows First Time in Months After Tax Cuts
Even as the National Bank of Poland expects inflation to crest above 10% this year and next, driven by soaring fuel and food prices, the zloty has diverged from that trend. After briefly dropping below the psychologically significant level of 5 zloty to the euro last week, the Polish currency has climbed by more than 6% since this month's meeting.
The rally proves “that our monetary policy has a real and binding impact on the exchange rate of the Polish currency, even in a situation of highly changing conditions,” Janczyk said.
The zloty weakened 0.6% to 4.713 per euro at 10:03 a.m. in Warsaw, lagging regional peers and extending its loss since Russia invaded Ukraine to 2.7%. The yield on Poland's two-year zloty government notes was little changed at 5.16% after rising to the highest since 2009 earlier in the week.
The policy maker also credited the government's extension of levy caps on essential goods for taming Poland's inflation index to 8.5% last month from 9.4% in January. Prime Minister Mateusz Morawiecki announced that the measures, the so-called anti-inflation shield, would expire at the end of the year rather than July, “boosting the chance that the annual inflation may be single-digit this year,” Janczyk said.
Poland February Core Inflation +6.7% Y/y; Est. +6.3% Y/y
The central bank's question to return inflation to targeted levels is not only a question of raising rates, according to Janczyk. Prices in the country are impacted by a confluence of factors, including fiscal policy, global commodity prices and the fallout from the war in Ukraine, he said.
“Unpredictability is hitting its zenith during these weeks,” Janczyk said. “That's exactly why I'm seeing some space for being less bold in monetary tightening. The situation's changing though almost every hour, and we need to stay on alert to act accordingly.”
Since the Feb. 8 rate meeting, other policy makers said:
- Poland Should Raise Rates as Much as Necessary: MPC's Kotecki
- Polish Zloty Would Gain From Unlocking EU Funds, Sura Tells PAP
- Zloty Is ‘Strongly Undervalued,' Polish Central Bank Chief Says
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