Interest rates in Poland were increased in October and November. Currently, a further increase in interest rates is more likely, but it is difficult to predict whether this assessment will not change – pointed out Adam Glapiński, president of the National Bank of Poland and chairman of the Monetary Policy Council. The next MPC decision-making meeting is scheduled for December 8, 2021.
The president of the central bank, Adam Glapiński, wrote in response to questions from the Polish Press Agency that the NBP did not withdraw from the bond market, and also pointed out that with the current external price shocks, a marked strengthening of the zloty would have only a limited impact on domestic inflation.
“We will see what our next decisions will be at the next meetings. Today I can say that if the incoming data confirm our current assessment of the economic situation, the likelihood of further interest rate adjustments is higher than they will be kept at the current level. , the rating “for today” It may change, especially taking into account that recently the situation in the global and domestic economy has changed dynamically and has surprised us more than once “- wrote the NBP governor.
“It cannot be ruled out that the prices of raw materials in global markets will drop significantly at some point. Or that for some reason – whether as a result of the increasing wave of disease or as a result of continuing disturbances in supply chains – the economic situation will significantly weaken. And then these probabilities may be completely different. In short, please do not perceive the assessment of these probabilities as some kind of declaration regarding our future decisions. The Council does not make such declarations “- he added.
The central path of the November projection of the National Bank of Poland assumes that CPI inflation in 2021 will amount to 4.9%, in 2022 it will be 5.8%, and in 2023 it will amount to 3.6%. The central path assumes the dynamics of Poland’s GDP in 2021 at the level of 5.3% and 4.9%. in 2022 and 2023.
PAP received replies from Glapiński on Wednesday evening, ie before Friday’s GDP flash reading for the third quarter, which surprised with a reading above the consensus. The quick estimate shows that the seasonally unadjusted GDP in the third quarter of this year. increased in real terms by 5.1 percent. Every year. Meanwhile, economists expected 4.8 percent growth. Every year. The responses also came before the zloty weakening during the long weekend.
Interest rates in Poland
The NBP president explained in his responses that if in the past there were signals concerning, for example, keeping interest rates unchanged, they were always conditional, i.e. they were presented on the condition that the future situation did not differ from the assessments at that time.
“Unfortunately, the reality is surprising, and since the conditions change, we also have to react to it and adjust the parameters of monetary policy. For this reason, we do not announce an ex ante ‘monetary tightening cycle’, because each time the Council’s decision depends on new available information influencing the assessment of the outlook. We can talk about the future only in terms of probabilities, which are also conditional, “wrote Glapiński.
When asked what he meant speaking in a recent interview with TVN24that inflation will fall after January and no further rate hikes will be needed reiterated that today it seems that a further increase in rates is more likely than their stabilization, but it is difficult to predict whether this assessment will not change.
“All the more so, I will not speculate what decisions may be taken at the next meetings of the Council. One thing I can say with full conviction is that the Council will take all necessary measures to prevent inflation from becoming elevated. fulfill our basic goal: to ensure price stability in the medium term and to support sustainable growth of the Polish economy. And this statement can be considered a declaration, or even a commitment, “- he emphasized.
In the opinion of the president of the NBP, the question of what the target level of interest rates may be appropriate after the pandemic for the Polish economy is basically the same as the question about the forecast of interest rates, which the NBP does not publish.
“It is our conscious decision, because such forecasts are often a source of misunderstandings, especially when read or interpreted unconditionally, even though they are conditional in nature. (…) Some recipients perceive the central bank’s forecasts as a certain declaration. – contrary to the intentions of the central banks publishing them – they may not increase the transparency or effectiveness of monetary policy, but rather become a source of additional challenges. Therefore, we do not use this communication tool “- explained Glapiński.
In October and November, the MPC raised the reference interest rate by a total of 115 basis points to 1.25%.
Zloty exchange rate
The NBP president reiterated that the zloty exchange rate was floating, although the NBP reserves the right to intervene, similarly to other central banks. At the same time, he emphasized that the National Bank of Poland does not take actions on the currency market “without a clear need” and “it certainly does not intervene according to some predetermined schedule”.
“At the end of last year, there was a risk of a strong pro-cyclical appreciation of the zloty at a time when the dynamics of economic growth weakened again in the fourth quarter and therefore it was necessary to react. We did not intervene this year. It is difficult to say that the NBP prefers the weaker zloty. we say that our actions depend on market conditions “- explained Glapiński.
Referring to the impact of the zloty exchange rate on inflation, the NBP governor pointed out that although the exchange rate has an impact on import prices, it should not be overestimated. “With such strong external shocks in the oil, gas and agricultural commodity markets as we are currently dealing with, even a marked appreciation of the zloty would have only a limited impact on the domestic price dynamics. At the same time, a strong appreciation of the zloty would certainly weigh heavily on our exporters, some of which and so it is struggling with problems related to global factors, and – as a result – it would have a significant negative impact on the domestic economic situation “- he stressed.
Main photo source: PAP / Wojciech Olkuśnik