Poland Seen Dodging `Crazed' Easing Amid Search for Belka's Heir

  • Glapinski wins praise as front-runner to become next governor
  • Central banker said he opposes `any' decrease in interest rate

As Poland’s new government searches for a successor to central bank Governor Marek Belka, it may have the antidote for investors unsettled by the institutional crisis gripping the nation. And it won’t have to break party ranks to find its candidate of choice.

Adam Glapinski, mentioned as a leading contender for the job, may become the first internal pick to lead the National Bank of Poland in the country’s modern history. The 66-year-old economics professor, together with Jaroslaw Kaczynski, co-founded the Center Alliance, which in 2001 was transformed into Law & Justice. The party swept to power in 2015 with wins in presidential and parliamentary elections after eight years in the opposition.

Adam Glapinski

Source: Narodowy Bank Polski

With five months left before the end of Belka’s six-year term, Standard & Poor’s shock downgrade of Poland’s credit rating on Friday made the stakes clear. The zloty suffered its biggest rout since September 2011 and the government’s local-currency bond yields jumped after S&P warned that Law & Justice’s push to exert greater control over the state threatened the independence of institutions, “most importantly” the central bank. Glapinski, a member of the Monetary Policy Council for the past six years, countered on Monday that its independence is “deep-rooted” and won’t buckle under political pressure.

“It is interesting that he is a soft hawk in our view and again puts to rest market fears that the new MPC -- and the NBP more widely -- will be on a crazed cutting mission and an application of unorthodox instruments,” said Peter Attard Montalto, a senior emerging-markets economist and strategist at Nomura Holdings Plc.

Looming Changeover

In February, Glapinski will be among the last of the eight members to leave the 10-person Monetary Policy Council when their terms end. All of them will be nominated by Law & Justice -- which controls both houses of parliament -- and the party’s ally, President Andrzej Duda. The president will also name Belka’s replacement.

Glapinski said he will advise new members to refrain from reducing borrowing costs. On Monday, he said that it was “too early” to call him a candidate to become the next governor.

Since the collapse of communism in 1989, Glapinski served as construction minister and was twice elected as lawmaker. He also held several posts in business, including in 2007-2008 as the chief executive officer of Polkomtel SA, the second-largest mobile company at the time.

‘Relatively Cautious’

“Were he to become the next central bank chief, it might be seen as a relatively cautious appointment and therefore welcomed by the markets,” said William Jackson, a senior emerging-market economist at Capital Economics Ltd. “In his comments, Glapinski stressed the importance of central bank independence -- a key concern for investors at the moment.”

S&P, which cut Poland to BBB+, the third-lowest investment grade, pointed to a series of measures from the new government that it said “weaken the independence and effectiveness of key institutions.” Since winning elections in October, the government led by Prime Minister Beata Szydlo pushed to overhaul the constitutional court and public media, moves that also drew criticism from the European Commission.

‘Stabilizing Policy’

Speaking in an interview on Monday, Glapinski said the central bank will “conduct a stabilizing policy and avoid any imbalances.” He said he opposes “any, even a quarter-point” reduction in rates.

At the current council’s last meeting, the panel on Thursday left its benchmark at 1.5 percent. The central bank ended a three-year easing cycle with a half-point cut in March, reiterating that the changeover in personnel was among the arguments against further loosening.

Belka said that day he wouldn’t expect “sudden and large” changes in monetary policy because of the transition in leadership. On Tuesday, the outgoing governor said he “wouldn’t even mention a rate cut right now. We don’t want the zloty to slide, do we?”

The zloty advanced for a second day on Tuesday and traded 0.4 percent stronger against the euro. Forward-rate agreements showed bets for less than a quarter-point of monetary easing in the next six months, compared with 38 points a week ago.

“Of course it’s difficult to say now what monetary policy will really look like,” BNP Paribas SA economist Michal Dybula said by phone. “Based on what we know about Glapinski and what we heard from him so far, it will be predictable and reliable, and the central bank will remain an anchor of stability during a volatile time in Polish economic policy.”

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