On January 4, after a two-day meeting, the Monetary Policy Council decided to leave interest rates unchanged. The rationale was released after the meeting.
The Monetary Policy Council has completed its first two-day decision-making meeting in 2023. On January 4, we learned about a decision that is of key importance for borrowers, but not only.
Interest rates have not changed, but inflation is not slowing down
In a statement following the two-day meeting of the Monetary Policy Council, we read that one of the main problems for the economy is high inflation.
“However, inflation remains high, mainly due to the fact that the increase in costs is passed on to consumer prices. High commodity prices are reflected in rising food and energy prices, and, together with the lingering effects of previous disruptions in global supply chains, increase the operating costs of enterprises, which, in the face of still relatively high demand, encouraged companies to raise prices and contributed to more high inflation base” says the communiqué issued following the meeting of the IPC.
Price pressure drops
However, the Council also points to positive signals from the market, which served as the basis for keeping interest rates at the current level.
“Consumer price growth was still limited by the so-called anti-inflation shield. At the same time, PPI inflation has been declining in recent months, suggesting a possible easing of price pressures affecting consumer prices. - read on.
The Board reaffirmed that it believes that the expected worsening of economic conditions in the external environment of the Polish economy, together with the tightening of monetary policy by major central banks, will have a limiting effect on global inflation and commodity prices.
“The weakening of the global economic situation will also contribute to a decrease in the dynamics of economic growth in Poland. In such circumstances, a significant tightening of the NBP’s monetary policy for the time being will help bring inflation in Poland down to the NBP’s inflation target. At the same time, due to the scale and duration of the impact of the current shocks, which remain outside the influence of domestic monetary policy, inflation will remain high in the short term, and inflation will gradually return to the inflation target of the NBP. A stronger złoty would help bring inflation down faster, which, in the opinion of the Council, would be in line with the fundamentals of the Polish economy. - read on.
End of pay cycle? Advice Cautious
The monetary authorities also argued that further decisions of the Council would depend on incoming information about the prospects for inflation and economic activity, including the impact of Russia’s armed aggression against Ukraine on the Polish economy.
“The NBP will take all necessary actions to ensure macroeconomic and financial stability, including, first of all, to limit the risk of maintaining high inflation. The NBP may intervene in the foreign exchange market, in particular, to limit fluctuations in the exchange rate of the zloty that are inconsistent with the direction of the monetary policy pursued. – was written further in the communiqué, keeping the position of the previous month.
Today, MPC kept its base rate at 6.75%, in line with expectations. The Council raised interest rates for the first time in October 2021 and then raised them for 10 consecutive months, until September 2022. Overall, the base reference rate increased over this period from 0.1 percent to 6.75 percent. At subsequent meetings, the MPC decided to leave interest rates unchanged.
Source: Wprost
