Central Bank Board Members Told Lawmakers That NBP Can't Issue Retail Bonds

During their testimony to the parliamentary Public Finances Committee yesterday, NBP First Deputy Governor Marta Kightley and Management Board's Rafal Sura said that it would be legally impossible for the central bank to issue anti-inflationary bonds, which had been suggested by some politicians and at least one Monetary Policy Council member.

• Kightley told lawmakers that issuing retail inflation-linked bonds is not part of the normal toolbox of central banks, they "do not use any such tools." She added that the NBP's monetary policy tools target commercial lenders and not the general public.
• According to the First Deputy Governor, if the central bank issued retail inflation-linked bonds, it would pose a "great risk for the country's financial stability, because people would take money out of deposits to buy such assets."
• Sura added that issuing retail bonds would violate the NBP Act, which creates a legal foundation for the operation of Poland's central bank. The official said that the central bank has no legal possibility to issue bonds available to individual investors.
• The idea of the NBP issuing inflation-linked bonds for households was floated by MPC's Ludwik Kotecki last year as a measure to create competition for commercial lenders, forcing them to raise market interest rates.
• A similar view was expressed by former NBP Governor and current MEP Marek Belka, who said that it would incentivise commercial banks to increase interest rates on deposits, "freezing" excessive liquidity for a few years.
• Kightley and Sura were testifying on the NBP's activity and monetary policy implementation in 2022. Note that they do not sit on the Monetary Policy Council, although MPC's Henryk Wnorowski also attended the parliamentary hearing.