Inflation‘s Persistence May Delay Interest Rate Cuts, Velobank economist Warns
Warsaw, Poland – October 26, 2023 – Expectations of important interest rate reductions in Poland may be premature, according to Dr.Piotr Arak, chief economist of Velobank and head of postgraduate studies at the University of Warsaw’s Faculty of Economic Sciences. Arak suggests that persistently high inflation could prevent the National Bank of Poland from lowering rates as aggressively as currently anticipated, potentially keeping them closer to 4% at the end of 2026 instead of the previously projected 3.5%.
The shift in outlook stems from inflation proving more “sticky” than initially forecast, complicating the path toward the central bank’s target. This development impacts both consumers and businesses, influencing borrowing costs for mortgages, loans, and investments. A slower pace of rate cuts could mean continued financial pressure for households and potentially dampen economic growth.
“Consequently, a variant of maintaining [interest rates] at a closer 4% level will become equally likely,” Arak stated. The economist’s assessment comes amid growing concerns about Poland’s rising national debt, as recently outlined in a strategy presented by the Ministry of Finance.
