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Gov's Adviser Argues That Disinflation Is Possible Even With Negative Real Interest Rates

NBP

Rzeczpospolita daily circulated an op-ed by Leon Podkaminer, an adviser to the NBP Governor, who pushed back against historical arguments of the central bank's hawkish critics, who suggested that positive real interest rates are necessary to combat high inflation, citing counterexamples (the US in 1947 and 1951, Poland in 2021-2023).

  • Podkaminer points to evidence from the Eurozone where disinflation continues in all member states, even as ECB interest rates were "deeply negative" in 2022 - especially in Slovakia and the Baltic countries.
  • He suggests that (1) current inflation in the EZ (and perhaps elsewhere) is independent of CB interest rates; (2) negative real interest rates are not an obstacle to rapid disinflation.
  • Note that Podkaminer is not a member of the MPC but is an adviser to the NBP Governor and frequently makes public comments in this capacity. His article contrasts with the Governor's remarks on the desirability of positive real interest rates in the current conditions.
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