Poland central bank power struggle puts złoty traders on alert – The Armchair Trader

Poland’s central bank has warned that its monetary policy committee cannot operate fully without the participation of its governor, escalating a dispute over the institution’s leadership that risks adding a political premium to the country’s currency and government debt.

The National Bank of Poland (NBP) issued a statement on 22 October setting out the governor’s authority under the law, including the exclusive power to convene meetings of the Monetary Policy Council (MPC). It said another council member could chair proceedings only during a brief, temporary absence and could not assume the governor’s wider statutory responsibilities.

The intervention comes amid a growing confrontation between central bank governor Adam Glapiński and the government of prime minister Donald Tusk. It raises questions about the bank’s governance and its capacity to respond to financial stress.

For forex traders, the immediate concern is not an announced change in monetary policy but the potential erosion of confidence in the central bank’s institutional stability. The Polish złoty is sensitive to domestic interest-rate expectations, global risk appetite and perceptions of political risk. Prolonged uncertainty over the bank’s leadership could make investors demand greater compensation for holding Polish assets. Particularly if the dispute begins to affect policymaking or emergency liquidity operations.

What’s going wrong at Poland’s central bank?

The dispute has several fronts. Glapiński, whose term runs until June 2028, faces a proposed referral to a state tribunal over allegations that he violated constitutional and statutory rules. Including through asset purchases in 2020-21 that opponents say indirectly financed the budget deficit without proper authorisation. Glapiński rejects the accusations, and the central bank has described them as unfounded.

Poland’s lower house of parliament is expected to vote on the referral in the second half of November, according to parliamentary speaker Włodzimierz Czarzasty. The vote could deepen the conflict because the legal threshold for bringing the governor before a tribunal remains disputed. Legislation specifies an absolute majority, while a 2024 Constitutional Tribunal ruling said a three-fifths majority was required. The government contests the legality of that ruling.

Separately, a stand-off over appointments to the NBP’s management board has raised concerns about the bank’s ability to carry out its wider functions. Tusk has refused to approve four nominees proposed by Glapiński, while another board member is due to retire in November. The Financial Times has reported that the board could fall below its legal minimum. Potentially complicating some emergency operations even if monetary policy decisions remain the responsibility of the separate MPC.

The NBP’s latest statement, a copy of which was sent to The Armchair Trader by the NBP, appears designed to reinforce Glapiński’s central role in the institution’s decision-making. It says the governor must participate actively in the work of both the MPC and the management board. Rather than suggesting that another official can assume his powers indefinitely.

Where to now for the Polish złoty?

The currency implications will depend on whether the dispute remains a political and legal confrontation or begins to undermine the credibility of monetary policy. A perception that interest-rate decisions could be influenced by political considerations would be more damaging to the złoty than a disagreement over meeting procedures alone.

The monetary backdrop is already complicated. The MPC left its benchmark interest rate unchanged at 3.75 per cent in October, after cutting it earlier this year. Inflation rose to 4 per cent in September, above the NBP’s 2.5 per cent target with a tolerance band of one percentage point. This increases the challenge for policymakers as they balance price pressures against economic growth.

Stable rates may continue to support the złoty if they preserve Poland’s yield advantage over other markets. But that support could be weakened if big traders begin to question the independence or operational effectiveness of the central bank.

For now, the NBP statement does not announce a change in rates or establish that monetary policy decisions have been disrupted. The key dates for investors are the November parliamentary vote and any further developments in the management-board appointment dispute. A clear legal resolution could limit the risk premium. A prolonged institutional stand-off could leave the złoty more vulnerable to shifts in global sentiment.