Central Bank of Poland said there was no need to lower rates
2023.01.12 07:35
Central Bank of Poland said there was no need to lower rates
By Kristina Sobol
Budrigannews.com – According to Ludwik Kotecki, a central banker, Poland’s double-digit inflation leaves no room for loosening monetary policy this year, but interest rates will not rise further.
Markets have focused on when the National Bank of Poland (NBP) might start loosening policy after the main interest rate remained at 6.75 percent for the fourth month in a row in January and inflation fell below expectations in December.
Kotecki, who is a member of the rate-setting monetary policy council at the central bank, stated, “I believe that the Monetary Policy Council will not raise interest rates this year, but at the same time I do not see room to lower them in 2023.”
According to Kotecki, even talking about lower interest rates right now could weaken the impact of monetary policy.
Kotecki’s views follow those of Central Bank Governor Adam Glapinski last week, who stated that despite the fact that inflation rates are still rising, he remained hopeful that a rate cut could occur this year.
In December, inflation was 16.6%, according to a statistics office flash estimate. According to Kotecki, inflation will reach its highest point in February 2023, when it will be around 14% on average per year.
After that, the rate of price growth will slow down over time, and by the end of the year, it may stabilize at a lower, but still double-digit level of 11-13 percent.
“Now, how about the interest rates? Nothing. Even though it is officially in the process of tightening monetary policy, the MPC has officially ended the cycle of hikes. He stated, “I believe that talking about rate cuts at the moment is a communication error” that weakens the impact of monetary policy.
“It’s like putting yourself in harm’s way. Take a look at what the ECB and Fed are doing. “We pretend to be hawks and say that in a moment we will be doves, but they are deliberately exaggerating how hawkish they will be,” he added.
In 2024, Kotecki predicts that inflation will still be well below the target of 2.5%, plus or minus one percentage point.
“I believe that in the base scenario, inflation will remain around 10% in 2024. I have no idea why that shouldn’t be the case. However, there are a lot more unknowns regarding 2024,” he stated.
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