Poland's July rate cut not the start of a cycle, central bank chief says

WARSAW (Reuters) -A 25-basis-point cut in Polish interest rates this week is not the start of a policy-easing cycle, central bank Governor Adam Glapinski said on Thursday, though he did not rule out another such move in September. 

Poland's central bank unexpectedly cut its main interest rate to 5% on Wednesday, citing its expectation for a clear decline in inflation in the coming months.

Glapinski said on Thursday that the bank was not giving a path for interest rates.

"Further decisions will depend on incoming information, we are not announcing a path of rate cuts, this is not the beginning of a cycle," Glapinski told journalists, when asked if there would be another cut at the next meeting in September if data was positive.

"We are not closed to any decisions," he added. 

Poland's statistical office said this week that annual inflation in June was 4.1%, slightly higher than the 4.0% forecast in a Reuters poll and up from a revised 4.0% in May. The central bank's inflation target is 1.5%-3.5%.

On Wednesday, the bank also published new forecasts for inflation and economic growth, which indicated the pace of price growth would be lower than expected in its projection from March.

Glapinski said that he expected inflation to fall to the target range as soon as this month.

"If inflation stays at 2.5%, interest rates will also go down to a similar level, but these are not high rates. We rather try to maintain rates so that they have an anti-inflationary effect, but are not excessively high and do not stifle the economy," he told journalists.

Glapinski also said that inflation may rise slightly in coming quarters, but it would be in line with the central bank's target in the medium term, adding that the situation for household energy prices in the second half of the year was still unclear.

Analysts said that although the central bank governor's description of the economic situation in Poland was quite hawkish, they expected interest rates to fall further.

"The MPC’s communication is unfortunately not very transparent. To sum up, inflation will fall to target in the second half of 2025, and rate cuts will be larger than the first part of the conference might have suggested," ING economists wrote on social media platform X.

(Reporting by Karol Badohal, Alan Charlish and Pawel Florkiewicz. Writing by Anna Wlodarczak-Semczuk. Editing by Mark Potter)