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Inflation in August 2021 at the highest in 20 years. Why are prices soaring? The economist explains

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We are dealing with a large fiscal impulse. As part of the policy related to anti-crisis shields, funds that were transferred from public finances to various types of support instruments fed the economy and could cause inflationary pressure – said Dr. Agnieszka Chłoń-Domińczak from the Institute of Statistics and Demography of the Warsaw School of Economics. She pointed out that the price increase in Poland is also influenced by the policy of the central bank, which keeps interest rates at a low level.

This week the Central Statistical Office (GUS) informed that inflation in August 2021 in Poland it was 5.4 percent year on year. In monthly terms, the prices of consumer goods and services increased by 0.2 percent. Inflation was last higher in June 2001 at 6.2 percent. In July 2001, the price increase in Poland was 5.2 percent.

Inflation in Poland August 2021 – why is it so high?

Chłoń-Domińczak was asked, inter alia, about how inflation will develop in the near future. – It depends on many factors. First of all, on what fiscal and monetary policy will look like. Here, the way in which interest rates are shaped, what decisions will be made by the Monetary Policy Council (MPC) will also have an impact on inflation – she explained.

She added that it is also a question of what pressure on inflation results from wage increases. – We have a labor market where the unemployment rate is very low and wage expectations are rising. It will also translate into inflation. Some conditions related to the demand and supply – here we can also see very big changes, for example when it comes to various types of products related to construction. The prices here jumped up very sharply. This also automatically translates into the fact that subsequent prices go up and this inflation is rising – she said.

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According to the economist, the price increase is partly due to pandemic conditions. – In some cases, the cost of producing certain products and services has increased due to the fact that there are additional constraints that have influenced how these products or services are performed. And that automatically means an increase in prices, she said.

As she said, it is necessary to think about how to get out of such postovid management of public finances, supporting the development of the economy, so that this price increase is not very severe.

– We are dealing with quite a large fiscal impulse. As part of the policy related to anti-crisis shields, funds that were transferred from public finances to various support instruments fed the economy and may have caused some inflationary pressure. This is overlapped with global factors that cause the prices of raw materials to go up, Chłoń-Domińczak noted.

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