Rate cuts in Poland may start in the second half of 2025, says IMF representative
WARSAW, March 5 (Reuters) - Monetary policy easing in Poland may begin in the second half of 2025, International Monetary Found (IMF) representative in Poland Geoff Gottlieb said on Wednesday during the European Financial Congress event in Warsaw.
He added that the current level of Polish interest rates was restrictive, "well above neutral rate".
"Our view is that cuts possibly can begin in the second-half of this year but should move fairly slowly given all the risks to this inflation," Gottlieb said.
"The final step on inflation is not yet done, so it's important not to rush the return to a neutral monetary stance."
The National Bank of Poland (NBP) has kept interest rates unchanged since October 2023, with the reference rate at 5.75% and central bank governor Adam Glapinski said in February there were no grounds for lowering borrowing costs at the moment.
Inflation was 5.3% in January, while the central bank's inflation target is 2.5% plus or minus one percentage point.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
2 hours ago
- Reuters
Pakistan likely to hike defence spending but slash overall budget in 2025-26
ISLAMABAD, June 10 (Reuters) - Pakistan will unveil its annual federal budget for the coming fiscal year later on Tuesday, seeking to kickstart growth while finding resources for an expected hike in defence expenditure following the conflict with India last month. Islamabad will also have to contend with remaining within the discipline of its International Monetary Fund programme and the uncertainty from new trade tariffs being imposed by the United States, its biggest export market. Media reports say the government is likely to present a 17.6 trillion rupee ($62.45 billion) budget for the fiscal year beginning July 1, down 6.7% from this fiscal year. It has projected a fiscal deficit of 4.8% of GDP, against a targeted 5.9% deficit in 2024-25, the reports say. Analysts said they expect an increase of around 20% in the defence budget, likely offset by cuts in development spending. Pakistan allocated 2.1 trillion Pakistani rupees($7.45 billion) for defence in the outgoing fiscal year, including $2 billion for equipment and other assets. An additional 563 billion rupees ($1.99 billion) was set aside for military pensions, which are not counted within the official defence budget. India's defence spending in its 2025–26 (April-March) fiscal year was set at $78.7 billion, a 9.5% increase from the previous year, including pensions and $21 billion earmarked for equipment. It has indicated it will step up expenditure following the May conflict with Pakistan. The government of Pakistani Prime Minister Shehbaz Sharif has projected 4.2% economic growth in 2025-26, saying it has steadied the economy, which had looked at risk of defaulting on its debts as recently as 2023. Growth this fiscal year is likely to be 2.7%, against an initial target of 3.6% set in the budget last year. Pakistan's growth lags far behind the region. In 2024, South Asian countries grew by an average of 5.8% and 6.0% growth is expected in 2025, according to the Asian Development Bank. Expansion of the economy should be aided by a sharp drop in the cost of borrowing, the government says, after a succession of interest rate cuts by the central bank. But economists warn that monetary policy alone may not be enough, with fiscal constraints and IMF-mandated reforms still weighing on investment. Finance Minister Muhammad Aurangzeb said on Monday that he wanted to avoid Pakistan's boom and bust cycles of the past. 'The macroeconomic stability that we have achieved, we want to absolutely stay the course,' he said. 'This time around we are very, very clear that we do not want to squander the opportunity.' The budget is expected to prioritize expanding the tax base, enforcing agriculture income tax laws, and reducing government subsidies to industry, to meet the terms of a $7 billion IMF bailout signed last summer. Just 1.3% of the population paid income tax in 2024, according to the tax authorities, with agriculture and the retail sector largely outside of the tax net. The IMF has urged Pakistan to widen the tax base through reforms which include taxing agriculture, retail, and real estate. Ahmad Mobeen, senior economist at S&P Global Market Intelligence, said that he expected the revenue target for 2025-26 will be missed. 'The shortfall will mostly be owing to lack of optimal implementation of announced measures as well as absence of meaningful structural reforms to widen the tax net in general,' said Mobeen. ($1 = 281.8400 Pakistani rupees)
Reuters
10 hours ago
- Reuters
Argentina launches $2 billion repurchase agreement to boost reserves
BUENOS AIRES, June 9 (Reuters) - Argentina's central bank will launch a repurchase agreement of up to $2 billion, known as a REPO, to boost its foreign reserves, it said on Monday. The deal - announced alongside other measures to increase the central bank's reserves - comes ahead of an expected review with the International Monetary Fund (IMF) of the country's recently signed $20 billion loan agreement. Argentina needs to boost its reserves ahead of the review, and has said it will not purchase dollars locally to do so. On Monday, the bank reported $38.60 billion in reserves, short of the $40 billion needed. The REPO deal is set for Wednesday, the central bank said in a statement.
Reuters
10 hours ago
- Reuters
TRADING DAY London calling, stocks crawling higher
ORLANDO, Florida, June 9 (Reuters) - TRADING DAY Making sense of the forces driving global markets By Jamie McGeever, Markets Columnist I'm excited to announce that I'm now part of Reuters Open Interest (ROI), an essential new source for data-driven, expert commentary on market and economic trends. You can find ROI on the Reuters website, and you can follow us on LinkedIn and X. Trade tensions, policy uncertainty and shaky economic data continue to cloud the near-term outlook for world growth, but they remain on the back burner for now as investors kick off the week by pushing global stock markets higher. In my column today I look at why the dollar has depreciated significantly this year regardless of how U.S. stocks and bonds have performed. The main reason? Hedging. More on that below, but first, a roundup of the main market moves. If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today. Today's Key Market Moves London calling, stocks crawling higher It was a fairly quiet start to the week across global markets on Monday, with strong equity gains in Asia followed by a grind higher on Wall Street which lifted the MSCI World index to a fresh record high. The main areas of focus for investors were China's economic 'data dump' for May, then the high-level U.S.-China trade talks in London. The two are connected - the U.S. is a less important market for China than it used to be, underscored in May's trade figures from Beijing and reflected in the lack of concrete progress from the negotiations in London. China's total exports rose 4.8% in May from a year earlier but this masks a huge split between the U.S. and the rest of the world. Exports to the U.S. plunged 34.4% year-on-year in value terms, the sharpest drop since February 2020 just before the pandemic, while exports to the rest of the world rose 11.4%. Monthly data are volatile, of course, and May's figures were also distorted by tariffs. Still, U.S.-bound shipments worth $28.8 billion last month were just 9% of the total $316 billion. Economist Phil Suttle notes that is less than half the average share in the decade leading up to President Donald Trump's first trade war. The London talks are expected to continue on Tuesday. But as was the case following Trump's telephone call with Chinese leader Xi Jinping on Thursday, there is little indication of a significant breakthrough, far less China bending to U.S. demands. "U.S. Treasury Secretaries who live in unbalanced economies might not want to throw barbs such as the 'most unbalanced in modern history' at China without first looking at some data," Suttle wrote on Monday. "The choice to fight an opponent should be conditioned on a clear-headed view of its strengths and weaknesses. The U.S. has done a marvelous job of (once again) deluding itself on this front," Suttle added. Still, divisions between the two countries and the threat to global supply chains are proving no barrier to rising stock markets. Japan's Nikkei and the MSCI emerging and Asia ex-Japan indexes rose around 1%, Hong Kong-listed tech stocks rose nearly 3%, and Wall Street closed in the green. Meanwhile, the dollar's trend this year of declining despite U.S. stocks and bonds rising was on full display on Monday. Wall Street closed slightly higher and Treasury yields fell as much as 5 basis points at the short end of the curve, yet the dollar slipped. Many analysts say one of the main reasons for this is non-U.S. investor hedging - more on that below. Dollar floored as investors seek that extra hedge All three major U.S. asset classes – stocks, bonds and the currency – have had a turbulent 2025 thus far, but only one has failed to weather the storm: the dollar. Hedging may be a major reason why. Wall Street's three main indices and the ICE BofA U.S. Treasury index are all slightly higher for the year to date, despite the post-'Liberation Day' volatility, while the dollar has steadily ground lower, losing around 10% of its value against a basket of major currencies and breaking long-standing correlations along the way. The dollar was perhaps primed for a fall. It's easy to forget, but only a few months ago the 'U.S. exceptionalism' narrative was alive and well, and the dollar scaling heights rarely seen in the past two decades. But that narrative has evaporated, as U.S. President Donald Trump's controversial economic policies and isolationist posture on the global stage have made investors reconsider their exposure to U.S. assets. But why is the dollar feeling the burn more than stocks or bonds? Non-U.S. investors often protect themselves against sharp currency fluctuations via the forward, futures or options markets. The difference now is that the risk premium being built into U.S. assets is pushing them – especially equity holders – to hedge their dollar exposure more than they have in the past. Foreign investors have long hedged their bond exposure, with dollar hedge ratios traditionally around 70% to 100%, according to Morgan Stanley, as currency moves can easily wipe out modest bond returns. But non-U.S. equity investors have been much more loath to pay for protection, with dollar hedge ratios averaging between 10% and 30%. This is partly because the dollar was traditionally seen as a 'natural' hedge against stock market exposure, as it would typically rise in 'risk off' periods when stocks fell. The dollar would also normally appreciate when the U.S. economy and markets were thriving – the so-called 'Dollar Smile' – giving an additional boost to U.S. equity returns in good times. A good barometer of global 'real money' investors' view on the dollar is how willing foreign pension and insurance funds are to hedge their dollar-denominated assets. Recent data on Danish funds' currency hedging is revealing. Danish funds' U.S. asset hedge ratio surged to around 75% from around 65% between February and April. According to Deutsche Bank analysts, that 10 percentage point rise is the largest two-month increase in over a decade. Anecdotal evidence suggests similar shifts are taking place across Scandinavia, the euro zone and Canada, regions where dollar exposure is also high. The $266 billion Ontario Teachers' Pension Plan reported a $6.9 billion foreign currency gain last year, mainly due to the stronger dollar. Unless the fund has increased its hedging ratio this year, it will be sitting on huge foreign currency losses. "Investors had embraced U.S. exceptionalism and were overweight U.S. assets. But now, investors are increasing their hedging," says Sophia Drossos, economist and strategist at the hedge fund Point72. And there is a lot of dollar exposure to hedge. At the end of March foreign investors held $33 trillion of U.S. securities, with $18.4 trillion in equities and $14.6 trillion in debt instruments. The dollar's malaise has upended its traditional relationships with stocks and bonds. Its generally negative correlation with stocks has reversed, as has the usually positive correlation with bonds. The divergence with Treasuries has gained more attention, with the dollar diving as yields have risen. But as Deutsche Bank's George Saravelos notes, the correlation breakdown with stocks is "very unusual". When Wall Street has fallen this year the dollar has fallen too, but at a much faster pace. And when Wall Street has risen the dollar has also bounced, but only slightly. This has led to the strongest positive correlation between the dollar and S&P 500 in years, though that's a bit deceptive, as the dollar is sharply down on the year while stocks are mildly stronger. Of course, what we could be seeing is simply a rebalancing. Saravelos estimates that global fixed income and equity managers' dollar exposure was at near record-high levels in the run-up to the recent trade war. This was a "cyclical" phenomenon over the last couple of years rather than a deep-rooted structural one based on fundamentals, meaning it could be reversed relatively quickly. But, regardless, the dollar's hedging headwind seems likely to persist. "Given the size of foreign holdings of both stocks and bonds, even a modest uptick in hedge ratios could prove a considerable FX flow," Morgan Stanley's FX strategy team wrote last month. "As long as uncertainty and volatility persist, we think that hedge ratios are likely to rise as investors ride out the storm." What could move markets tomorrow? Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, opens new tab, is committed to integrity, independence, and freedom from bias.
