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Thursday, June 13, 2024

Interest rates down. Sławomir Dudek on the decision of the Monetary Policy Council and the weakening of the zloty

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NBP interest rates fell more than expected. The Monetary Policy Council (RPP) surprised economists with the scale of easing. – The financial markets immediately assessed it. The exchange rate shot up, in the terminology of financial markets it is called a collapse of the exchange rate, said Sławomir Dudek, an economist and professor at the Warsaw School of Economics in “Rozmowie Piaseckiego” on TVN24. He pointed out that “such a great collapse of the exchange rate” occurred when the COVID-19 pandemic began and when the war broke out in Ukraine.

During the September meeting, the Monetary Policy Council decided to lower it NBP interest rates by 75 basis points. The reference rate decreased from 6.75%. up to 6.00 percent The MPC’s decision surprised economists of the largest banks in Poland. Most of them expected a reduction in interest rates in September, but on a smaller scale – by 25 basis points. This is the first interest rate cut since May 2020.

Rapid weakening of the zloty

– It is a huge surprise, the scale of this increase. Macroeconomists can argue, the assessment was made immediately by the financial markets. The exchange rate shot up, in the terminology of financial markets it is called a collapse of the exchange rate – commented in “Rozmowie Piaseckiego” on TVN24 economist, president and founder of the Institute of Public Finance, professor at the Warsaw School of Economics Sławomir Dudek.

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The former director of the Department of Macroeconomic Policy of the Ministry of Finance pointed out that in the last decade “such a great collapse of the exchange rate occurred in three cases”. – How the COVID-19 pandemic began and when it broke out war in Ukraine. This means that the speeches of the President (NBP Adam) Glapiński or the decisions of the Monetary Policy Council are as dangerous as the COVID-19 pandemic or the war in Ukrainebecause the scale of the currency deterioration was identical – said Dudek.

As he pointed out, there are discussions that it may also be about the PR effect. – The decision is economically shocking and all economists are obliged to react and comment on it. In fact, few economists, probably only the government ones, justify this decision – he pointed out.

– The PR effect is such that on the front pages of newspapers, in the media, in programs we say that President Glapiński lowered rates by 0.75, he does not have to hang a banner, because he has the PR effect for free. Maybe that was the motive – suggested the TVN24 guest.

In the opinion of the economist, “we have dangerous decision-makers in economic policy on Świętokrzyska Street, on both sides (the street has its headquarters Ministry of Finance and NBP – ed.), because it concerns the budget and monetary policy and they are really playing with fire.

– It’s like “after us the Flood”, they are walking on the edge. They are risking the value of the zloty. This is as dangerous as when the war broke out in Ukraine. We don’t know how it will end, he added.

Main photo source: TVN24



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