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Tuesday, June 25, 2024

Inflation and interest rates in Poland. Comments Joanna Tyrowicz, MPC member

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I really do not know where the idea that inflation is falling faster than expected, Joanna Tyrowicz, a member of the Monetary Policy Council, said in an interview with “Parkiet”. She added that the preferred level of interest rates is 7.75-8 percent. – There is a risk of consumer inflation hovering around 8 percent, and at the current level of interest rates it will not come down to the target of 2.5 percent – she assessed.

A member of the Monetary Policy Council stated that her “votes reflect the preferred level of interest rates in Poland: it is about 7.75-8 percent. It is based on inflation expectations, not the current level inflation“.

She added that “there is still a high risk that inflation will oscillate around 8 percent and at the current level of rates will not come down to the inflation target of 2.5 percent.

Rate cut talks ‘premature’

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The economist assessed that any discussion about interest rate cuts at this point, it damages the credibility of monetary policy in Poland and also reduces the effectiveness of the activities of the Monetary Policy Council.

– For many months the Council has kept interest rates unchanged, which in my opinion is too low. Any discussions on their reduction are premature and reduce the effectiveness of monetary policy transmission, she said.

According to Joanna Tyrowicz, “the current inflation path in the NBP forecasts remains about 0.9 percentage points above the central path from the March projection”.

“So I really don’t know where the idea that inflation is falling faster than expected came from,” she explained.

Read also: Tyrowicz: As a member of the MPC, I see a huge mountain

interest rates [czerwiec 2023 r.]PAP

MPC decision

The Monetary Policy Council did not change interest rates at the last meeting. Thus, the main NBP interest rate, i.e. the reference rate, is still 6.75 percent, the deposit rate is 6.25 percent, the Lombard rate is 7.25 percent, the discount rate is 6.85 percent, and the rediscount rate is 6.80 percent. The June meeting was the ninth in a row when the MPC did not change interest rates.

– Forcing further interest rate increases in a situation when inflation is falling would be irresponsible and would lead to economic turmoil and cause a recession – said the President of the National Bank of Poland, Adam Glapiński, at a press conference on Wednesday.

He explained that “if it is certain that in the coming quarters inflation will also fall significantly, there is a possibility of a reduction[in interest rates – ed.]. As he argued, the MPC acts rationally.

Main photo source: Shutterstock

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