Cycle of interest rate hikes has not ended, but paused, says c.banker Kochalski

By Pawel Florkiewicz

WARSAW, Nov 23 (Reuters) - Current data and forecasts indicate that the level of interest rates in Poland is appropriate now, but the cycle of monetary policy tightening has not ended, it has been paused, Monetary Policy Council (MPC) member Cezary Kochalski said.

The MPC earlier this month left its main interest rate unchanged at 6.75% for the second month in a row, and National Bank of Poland NBP Governor Adam Glapinski said Poland's rate hike cycle is paused and could continue.

"The current level of interest rates should allow us to bring inflation to the NBP's target, while maintaining macroeconomic and financial stability. The impact of further interest rate increases on inflation would be limited, but significant for GDP growth," Kochalski wrote in response to Reuters' questions.

"Further interest rate hikes cannot be ruled out ... if inflationary pressure and the economic situation diverge from the forecasts outlined in the last projection. The Council is fully determined to bring inflation down to the NBP's medium-term target," added the MPC member.

The new central bank inflation projection shows that inflation in Poland will not return to the NBP target range, 1.5%-3.5%, until the third quarter of 2025.

Kochalski wrote that inflation should fall toward the medium-term target from the second quarter of 2023.

The MPC member expects that in 2023 Poland's economic growth may be lower than 1%, but in the following years it will be significantly higher.

"I like the phrase of NBP analysts that we will have a 'soft landing' in terms of economic growth," Kochalski wrote.

"Due to the high statistical base, negative GDP growth may occur in the first quarter of next year, but I assume that only in this one quarter," he added. (Reporting by Pawel Florkiewicz; Editing by Mark Porter)