The decision (to reduce interest rates – ed.) favors the government because it reduces the costs of servicing public debt, and this debt is to be issued PLN 420 billion, which is a huge amount – said Ludwik Kotecki, member of the Monetary Policy Council, in the “Tak jest” program on TVN24 . – Already in July I said that if we make decisions like the one we made in September, it will be interpreted as political, first of all, even if it is not, and then the reaction will be the one we see today – he added.
A week ago, the Monetary Policy Council (MPC) decided to lower the rates NBP interest rates by 75 basis points to 6.00 percent. Most economists of the largest banks in Poland expected a reduction in interest rates, but on a smaller scale – by 25 basis points.
The reaction to the surprising decision of the Monetary Policy Council was a sharp weakening of the zloty, which further increased after Thursday’s conference of the head of the NBP, Adam Glapiński.
– The decision (to reduce interest rates – editor) favors the government because it reduces service costs public debtand PLN 420 billion of this debt is to be issued, which is a huge amount – said Kotecki.
He also added: – Already in July, I said that if we make decisions like the one we made in September, it will be interpreted as political, first of all, even if it is not, and then the reaction will be the one we see today.
Kotecki on the effects of the Monetary Policy Council’s decision
– Fuel is not the only commodity we buy abroad. We buy a lot of things. Not only goods, but also services, materials and so on. And all these goods today cost 20 cents more for each euro than they cost two weeks ago. Therefore, we will see this effect immediately. Secondly, the interest rates that have been reduced will, of course, also affect economic activity and this will probably be the case, unfortunately, it may be quite difficult to imagine, but in three or four quarters we will see such a decline. inflationi.e. instead of it continuing to fall towards the target, it will stop falling towards the target – explained Kotecki.
The MPC member also referred to Central Statistical Office data regarding August inflation, which was 10.1 percent year-on-year. – We are four times above our goal, which means it’s happening. If we had said two years ago that inflation would be at 10 percent, everyone would have thought it was impossible, Kotecki said.
He also added: – We are at a very dangerous moment, I think so. A deficit of over five percent this year, probably around five percent next year. But here we have a big unknown and it should also cause the Monetary Policy Council to behave cautiously, because it does not know what will happen in budget and fiscal policy after the elections, because it is not known who will shape it and how. However, finances are, first of all, opaque, with a very large imbalance. Our debt is growing. It is expected to reach PLN 2 trillion at the end of next year.
Kotecki: strange phenomena are intensifying because purchasing power has decreased
– These strange, various phenomena that are increasing are the result of the fact that the purchasing power of Poles has simply decreased. We can afford less today than we could afford two or three years ago, and that is why what is happening is happening. (…) Errors in economic policy do not result in an immediate deterioration of the entire economy. These delays are clear, lasting several quarters, and now we are exactly in a place where this recession is staring us in the face – emphasized the MPC member.
Kotecki was asked whether he believed that if economists elected to the Monetary Policy Council were elected by other political groups, they would be able to make different decisions, or does it not matter? – Of course he does. I mean it always matters. This is always a group of people who should, in this model form, discuss for a day or two and come to some compromise or non-compromise, as has been the case recently in our Monetary Policy Council. We are simply outvoted somewhere, Kotecki replied.
He explained that he could not talk about what was happening during the meetings. – There is actually a secrecy clause imposed on such meetings. Therefore, we cannot say much about the course. Actually nothing. However, much results from the voting results and they are public. After 60 days, you can see who votes how and, to some extent, why. And secondly, such information about the course of the discussion is published. Very synthetic, concise on two or three pages of the arguments that appeared during such a discussion – explained the MPC member.
According to him, statistical data unfortunately show “a weakening zloty, a decline GDP in the second quarter by almost 0.6 percent, consumption is in recession simply due to this high inflation.” – Also, these are not data that would confirm the theses or hypotheses put forward by the president. So, unfortunately, Mr. president is probably some kind of propaganda here cultivates – he said.
When asked whether he doesn’t feel that he is always opposed to the President of the National Bank of Poland, Adam Glapiński, at MPC meetings, Kotecki replied: – Well, I guess most of the time I really am. But it’s hard.
Main photo source: TVN24