MPC Minutes: Inflation remains exceptionally high despite decline

The Monetary Policy Council published a report from the April meeting, i.e. the so-called “minutes”. This is a summary of the discussion, pointing out the aspects that currently have the strongest influence on the formation of monetary policy.

Interest rates will stop rising

One of the main topics was the banking crisis in the US and Europe, as well as the policy of central banks.

“Some members of the Board estimated that – especially in light of lower market expectations regarding the dynamics of interest rates in leading economies and the rise in oil prices in recent days – this could limit the anti-inflationary impact of reducing inflationary pressures abroad by 2/4 of prices in Poland. Some members of the Council stressed that inflation – despite declining – remains exceptionally high in Central and Eastern Europe” - we read in the minutes of the April meeting of the Monetary Policy Council.

MPC signals economic slowdown

During the April decision-making meeting, some members of the Council indicated that the economic situation was deteriorating and that the drop in consumption could be stronger than expected.

“Referring to the current economic situation, some members of the Council assessed the incoming data as confirmation of the economic downturn. In particular, they noted that industrial production fell in February, while retail sales fell by 5%. lower than a year earlier, which, although partly the result of a base effect, indicates a further and possibly stronger-than-expected decline in consumption earlier this year. - we read.

“These members also pointed to a slight decline in the country’s manufacturing PMI in April, which has hovered below 50 for many months. However, some members of the Council were of the opinion that already in the second quarter of 2023, a slow recovery in economic activity can be expected, and in the third quarter of 2023, a slow recovery can be expected. its acceleration” - was written next.

The situation on the labor market remains good

Despite the deterioration of the economic situation and the economic downturn, the situation on the labor market in Poland remains good. The unemployment rate is still very low. In this regard, our economy is the vice-leader in the European Union, the MPC protocol states.

“However, some members of the Council pointed out that the gradual weakening of demand for labor was reflected in a clear decrease in the number of newly created and vacant jobs in the economy in the fourth quarter of 2009. and in the slowdown in the annual dynamics of employment in the enterprise sector in February this year.” - it was written.