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NBP: Governor Sees No Reason To Cut Interest Rates

NBP
PolandCEEMEAEM BulletBulletEmerging Market News

Governor Adam Glapinski says that considering current inflation dynamics and the inflation outlook there is "no reason" to cut interest rates, with accelerating economic recovery, tight labour market and loose fiscal policy amplify the risk of elevated inflation becoming entrenched.

  • The Governor says that Poland's robust economic growth is a positive, but is also pro-inflationary and delays the return to the inflation target.
  • He notes that unemployment is very low, the labour market is very tight, hence wages continue to grow at a pace close to +10% Y/Y, which affects services prices and core inflation. He adds that core inflation is "stubborn".
  • The Governor now points to the relatively wide budget deficit (fiscal gap to GDP ratio is will be among the biggest in the EU this year), noting that it reduces room for monetary easing.
  • The Governor says that the Council is aware of the fact that sources of elevated inflation are entirely independent from the central bank.
  • However, it still needs to keep monetary policy restrictive in order to prevent elevated inflation from becoming embedded in inflation expectations.
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Governor Adam Glapinski says that considering current inflation dynamics and the inflation outlook there is "no reason" to cut interest rates, with accelerating economic recovery, tight labour market and loose fiscal policy amplify the risk of elevated inflation becoming entrenched.

  • The Governor says that Poland's robust economic growth is a positive, but is also pro-inflationary and delays the return to the inflation target.
  • He notes that unemployment is very low, the labour market is very tight, hence wages continue to grow at a pace close to +10% Y/Y, which affects services prices and core inflation. He adds that core inflation is "stubborn".
  • The Governor now points to the relatively wide budget deficit (fiscal gap to GDP ratio is will be among the biggest in the EU this year), noting that it reduces room for monetary easing.
  • The Governor says that the Council is aware of the fact that sources of elevated inflation are entirely independent from the central bank.
  • However, it still needs to keep monetary policy restrictive in order to prevent elevated inflation from becoming embedded in inflation expectations.