Polish national bank slashes interest rates as inflation slows

Poland’s central bank lowered its key interest rate Wednesday, pointing to a drop in inflation despite a still-high rate of 8.2% last month, raising concerns about the cut being a political move.

The National Bank of Poland cut its benchmark rate a quarter of a percentage point to 5.75%. Analysts were expecting it after annual inflation dropped last month from 10.1% in August. Inflation was over 18% earlier this year.

It was the second rate cut since Sept. 9, when the central bank surprisingly slashed rates by three-quarters of a point.

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Other central banks worldwide are increasing borrowing costs or holding rates at high levels to tackle inflation stemming from the global economy’s rebound from the COVID-19 pandemic and Russia’s invasion of Ukraine, which spiked food and energy costs.

The European Central Bank hiked its key rate by a quarter-point last month to fight inflation, which has since dropped to a two-year low of 4.3% in the 20 countries using the euro currency. That’s far below Poland’s 8.2% inflation rate.

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The interest rate cuts in Poland prompted concerns that the central bank is trying to ease the burden of more expensive loans for many Poles to help the conservative government ahead of Oct. 15 parliamentary elections.

In the elections, the conservative governing party, Law and Justice, is fighting for an unprecedented third term. The central bank’s governor, Adam Glapinski, is an ally of the party and has taken actions in the past to help it.

Poland’s currency, the zloty, was slightly stronger after the rate cut.