Central Bank Adviser Says Further Rate Hikes Would Harm Consumption Without Curbing Prices

NBP Governor's adviser Leon Podkaminer wrote in an op-ed for Forsal that further interest-rate hikes by the Polish central bank would entail a risk "bordering with certainty" of a further decline in retail sales and household consumption, while having limited effectiveness in curbing inflation.

• Podkaminer noted that retail sales declined due to the inflationary erosion of households' real disposable incomes as well as elevated interest rates, but argued that this situation "does not have - and cannot have - any significant (and quick) impact on inflation."
• The NBP adviser wrote his article as a polemic against earlier comments from hawkish MPC member Ludwik Kotecki who calls for resuming the rate-hike cycle. Podkaminer accused Kotecki and his hawkish colleagues Tyrowicz and Litwiniuk of wanting to "treat anaemia with blood-letting."
• Podkaminer noted that "disinflation will progress at its own pace (dictated e.g. by imported commodity price dynamics and the effectiveness of supporting competitiveness in the domestic market)," adding that "higher interest rates will not facilitate this process."
• This comes as the Monetary Policy Council is locked in a two-day meeting to decide on interest rates. It is expected that the hawkish minority will be outvoted again and the panel will keep interest rates unchanged. The decision will be announced tomorrow, prior to Thursday's presser with Governor Glapinski.