November 29, 2023


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Zloty Drops as MPC Signals Weaker Currency, Possible Rate Cut

(Bloomberg) — Poland’s currency dropped as much as 1.4% on Wednesday after members of the country’s Monetary Policy Council called for a weaker zloty and its chief said it was ready to consider cutting borrowing costs.

While the current, record-low reference rate of 0.1% is “appropriate and best suits the situation,” the central bank may reduce it further in the first quarter of 2021, Governor Adam Glapinski said in an excerpt of an interview published on its website,, late Tuesday.

chart, histogram: Polish central bank seeks to weaken zloty further after it fell to 11-year low

© Bloomberg
Polish central bank seeks to weaken zloty further after it fell to 11-year low

In another excerpt released on Wednesday, Glapinski said appreciation pressure on the Polish currency is “very harmful,” and creates scope for “potential, decisive central bank interventions.”


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Glapinski’s interview raised a few eyebrows as Polish rate-setters have long expressed reluctance for more rate reductions amid concern that the weaker parts of its fractured financial industry depend on interest income for survival.

“The comment is very surprising, especially in light of Glapinski’s statement only a few days ago that the interest rate level is fair,” said Monika Kurtek, chief economist at Bank Pocztowy SA. “I still don’t see any reason to support a rate reduction in 2021.”

The interview comes two weeks after the central bank bought euros to sap the zloty’s strength, a move seen as an attempt to boost the value of the bank’s year-end foreign reserves to increase its payout to the state budget. Short-term zloty bonds rallied on Wednesday, while the currency became the worst performing in developing Europe this month.

The comments were followed by more of the 10-member rate-setting council advocating easing. While four have said increasing borrowing costs can stem inflation risks, Rafal Sura said on Wednesday that he wants the zloty to be significantly weaker, and didn’t rule out rate cuts in the future.

Video: Stocks remain flat after hitting fresh record highs (CNBC)

Stocks remain flat after hitting fresh record highs



While Grazyna Ancyparowicz spoke in favor of interventions and rate cuts if the zloty strengthens, Jerzy Zyzynski said there’s scope for an interest-rate cut to 0% and the currency should potentially be as weak as it was at the height of the 2008 global financial crisis.

“Based on the central bank analysis, the exchange rate of the zloty should be much lower, even at around 4.6 per euro as it was at the start of 2008,” he said by phone.

Polish central bank is analyzing further interest rate cuts

© Bloomberg
Polish central bank is analyzing further interest rate cuts

The central bank’s press office declined to say when the full interview with Glapinski would be published.

Polish rate setters cut the official rate by 140 basis points and started a quantitative easing program in the first half of this year as the coronavirus pandemic pushed the European Union’s largest eastern economy into its worst crisis since the collapse of communism.

The yield on Poland’s two-year zloty bonds fell five basis points to 0.04% at 4:26 p.m. in Warsaw. The zloty extended a 0.9% slide on Tuesday. Poland’s main stock exchange index WIG20 declined 1.3%.

“The governor’s comments are very surprising,” said Maciej Marcinowski, an equity analyst at Warsaw-based Trigon Dom Maklerski. “They show that the central bank intends to further stimulate the economy and weaken the zloty.”

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