(Bloomberg) -- Poland’s central bank left its benchmark interest rate unchanged for the fourth consecutive month as markets and policymakers weigh whether inflation risks warrant bringing a monetary easing cycle to an end. 

The rate-setting Monetary Policy Council kept the benchmark on hold at 5.75%, as expected by all 35 economists surveyed by Bloomberg. The panel said in a statement that while in the first quarter inflation is likely to fall markedly, price growth may increase significantly in the second half of 2024 “should higher VAT on food products be restored and energy prices raised.”

“The statement confirms the MPC’s willingness to stabilize rates at current levels,” said Grzegorz Maliszewski, chief economist at Bank Millennium SA. “There might be some room for rate cuts later this year.”

The panel next meets in March, when the central bank releases fresh inflation projections. In the meantime, investors will look to Governor Adam Glapinski’s monthly news conference on Thursday for more guidance. The zloty gained on the rate announcement, trading 0.2% higher against the euro as of 4:48 p.m. in Warsaw.

Markets are awaiting the next signal after Glapinski and his MPC allies pivoted away from a stint of monetary easing before the October election and took on a wait-and-see stance. An ally of the former nationalist ruling party, Glapinski is under scrutiny by Prime Minister Donald Tusk’s government, which has vowed to place him under investigation for politicizing his office and mismanagement. The governor has denied any wrongdoing. 

Glapinski said last month that the potential for inflation risks is unclear, especially for later this year, as the government weighs whether to extend caps on power and gas prices as well as a consumption tax on food, tools that were used to rein in inflation. 

Questions also remain over a potential unwinding of the bond portfolio the central bank built during the pandemic. Policymaker Ireneusz Dabrowski told Bloomberg in January that the central bank may consider such move if the government lifts the inflation measures, though other central bankers pushed back on the idea. 

--With assistance from Barbara Sladkowska.

(Adds details from MPC statement, economist comment from second paragraph)

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