High inflation in Poland means there is no scope for discussing interest rate cuts, central banker Cezary Kochalski said, adding that the cost of credit could fall when it is certain that price growth is quickly approaching the inflation target.
Poland's main interest rate has been at 6.75% since September and the focus of the markets right now is when borrowing costs in emerging Europe's largest economy could start to fall.
"Currently, I see no space for discussion about interest rate cuts. The ongoing economic and inflationary processes do not give grounds for this. Will there be space for such a discussion at the end of the year? It cannot be completely ruled out," Kochalski wrote in response to Reuters' questions.
When asked what conditions would have to exist for the MPC to start discussing monetary easing, he said there would have to be certainty that "inflation is moving quickly to the target over the monetary policy impact horizon".
Kochalski's opinion is similar to that presented by the governor of the National Bank of Poland, Adam Glapinski, after the April meeting of the Monetary Policy Council.
He said that MPC will cut interest rates when it is sure inflation is heading towards its target, adding that it has not officially ended its tightening cycle.
Kochalski also wrote that the slowdown in inflation was already visible and at the end of the year the price growth rate may be at a single-digit level.
He added that although increases in the cost of credit are still possible, but the scenario of bringing inflation down to the target is being realised, which is also due to the already implemented tightening of monetary policy.
"Inflation peaked in February, now it will gradually fall, as indicated by the current projection as well as incoming data and forecasts," he wrote.
Inflation was 16.1% in March compared to 18.4% in February. The NBP targets inflation of 1.5% to 3.5%. (Reporting by Pawel Florkiewicz, editing by Ed Osmond)