The Polish central bank kept interest rates on hold on Thursday for the sixth consecutive month, as the majority of policymakers forecast the steep inflation slowdown to be temporary.

The Monetary Policy Committee (MPC) held the benchmark rate at 5.75%, matching the forecasts of all 31 economists polled by Bloomberg.

The recent fall in inflation to 1.9%, which is within the central bank's target for the first time in three years, didn't influence the MPC to lower rates.

According to the bank's governor, Adam Glapinski interest rates will likely remain the same for the remainder of the year. That said, certain colleagues are willing to reconsider the possibility of rate cuts in Q4, Bloomberg reports.

The primary concern revolves around the potential resurgence of inflation, particularly as the government reintroduces higher taxes on food and considers lifting some energy price caps.

Within its post-meeting statement, the MPC said Poland's inflation trajectory was full of "substantial uncertainty" and price growth may "significantly" accelerate in the second half of 2024 should energy prices increase.

Investor focus now turns to the central bank governor's news conference on Friday for further guidance regarding interest rates and the inflation outlook.

"We consider the inflationary threat linked to energy price liberalisation as exaggerated," said Rafal Benecki, chief economist at ING Bank Slaski. Risks highlighted by the MPC "unnecessarily" fuel inflation expectations in the financial markets, he went on to add.

The news conference will be Glapinski's first public appearance since members of the ruling coalition filed a motion to investigate him regarding alleged political interference and potential irregularities in the bank's bond-buying program.

Despite these accusations, the governor has firmly denied any wrongdoing and contends that the situation, which could potentially result in his removal from office, lacks merit.

Glapinski sparked controversy by implementing two rate cuts in the months leading up to last October's general election. However, following the election, the governor has adopted a more cautious stance in response to growing concerns about subdued inflationary pressures.

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