Ludwik Kotecki Says Current Level Of Interest Rates Does Not Guarantee Price Stability

Forsal/DGP released an interview with NBP's Ludwik Kotecki recorded on the margins of the European Financial Congress held on June 5-7. The policymaker attended the conference as a moderator of a panel discussion on green finance in Poland. He headed for the event straight from the most recent MPC meeting, which resulted in a stand-pat decision on Tuesday.

• Kotecki told DGP that his sense is that the MPC's ambition in pursuing the inflation target is too small, while the current level of interest rates does not guarantee the stability of prices, understood as their moderate growth consistent with the official +2.5% +/- 1pp target.
• Asked if interest rates should be higher, Kotecki said that the MPC should study the July macroeconomic projection and assess if disinflation observed in the recent months is sustainable. He noted that weakness in the real economy may support disinflation amid worrying signs on Q2 economic recovery.
• Kotecki said that the MPC should be forward-looking as any decisions taken now would only affect the economy 4-6 quarters later, so more attention should be paid to forecasts than current inflation prints. He said that headline inflation may ease to single digits this year, but there is a big difference between +9.0% Y/Y and +2.5% Y/Y.
• The official said that delivering a premature rate cut under political pressure would be an "error" and would breach the law. He refused to comment whether there are signs of such a dynamic at MPC meetings, noting that the discussions are classified.
• Note that wires likely withheld the release of Kotecki's comments due to the NBP blackout period which is in force one working day after the conclusion of the monetary policy meeting. The Council wrapped up its meeting and announced the rate decision on Tuesday.