Deflationary factors disappearing: Polish rate setter

Photo: Shutterstock/Andrey_Popov

As Poland’s central bank agreed to hold rates at 1.5 percent, one “hawk” warned that factors stopping price rises may disappear.

“Factors which caused prices to fall both in Poland and globally are disappearing,” said economist Łukasz Hart, a more hawkish member of the Monetary Policy Council of the National Bank of Poland signalled after the central bank had decided to keep interest rates stable at 1.5 percent on the grounds that growth remained high and inflation was under control at 1.9 percent.

During the press conference following the interest rates decision of the NBP, the Chairman Adam Glapiński said that Poland was experiencing “relatively high growth” and that nevertheless inflation was relatively low. The increase slight increase in inflation in June was due to an increase in fuel prices. In his personal opinion rates were unlikely to change before the end of 2020, though, as he has said in previous announcements, he would not hesitate to react if there were a need to intervene on rates.

Agreeing with the chairman on his assessment overall, MPC member, economist Dr Łukasz Hart, said that if there were a change it would be likely to be an upward one and it would be caused by inflationary pressures, which were no longer being kept in check by deflation either in Poland or globally.

Dr Hart said that prices have been kept in check globally by the ease of being able to make savings on production by moving production abroad. This ease of access to pools of cheaper labour may be made more difficult if protectionism gains the upper hand in world trade.

In Poland, Mr Hart said that over the past few years in Poland price wars between discount stores have led to price reductions, but this was no longer quite such a recognizable trend. Similarly in housing: developers had cut their prices after the financial crisis, as they had taken less of a margin than before. Now prices of new-build flats are going up.