Central bank will likely continue rate-hike cycle says governor

2022-05-23 13:51 update: 2022-05-29, 15:28
Photo: PAP/Radek Pietruszka
Photo: PAP/Radek Pietruszka
The National Bank of Poland's (NBP) rate-setting body is likely to continue its cycle of interest rate hikes until it makes sure inflation is going down permanently, the NBP governor has said.

In a statement written for the World Economic Forum in Davos and published on the NBP's Obserwator Finansowy website on Monday, Adam Glapinski said the Polish economy could be affected by unexpected global events in the near future and the central bank would have to take such developments into account when making decisions.

Glapinski recalled that the Monetary Policy Council, the NBP's rate-setting body, embarked on a rate-hike cycle in October 2021, which he said would probably be continued in the coming months "until we're certain that inflation is permanently lowered."

"At the same time we're being prudent: We want to bring inflation down to the target, but because of its largely supply-side nature, we want to calibrate the pace of monetary tightening so that we don't do excessive social and economic harm," Glapinski said.

The NBP's official inflation target is 2.5 percent plus/minus one percentage point, but the latest reading for April showed prices of goods and services rising by 12.4 percent compared to the previous year. The NBP's reference rate is now at 5.25 percent after a series of hikes.

However, according to Glapinski, Poland is very well-positioned economically to meet any challenges, with economic sentiment still running high despite inflation and a tense geopolitical situation.

The governor observed that Poland's GDP growth exceeded 8 percent year on year in the first quarter of 2022 while unemployment was very low and wages were rising at a double-digit pace.

"The ability to maintain strong economic growth with record-low unemployment testifies to the huge strength of our economy, particularly given the war behind our eastern border," Glapinski said.

The World Economic Forum, which started in Davos, Switzerland, on Sunday, is expected to focus on problems caused by the war in Ukraine, the Covid-19 pandemic, climate change and economic crises. (PAP)