Poland continues to stave off any damaging impact from its over year-long bout with deflation, save perhaps a hit to budget revenues, NBP president Marek Belka said during a press conference following the October rate council sitting.
Belka and team have their eyes glued foremost on corporate conditions as the first likely location for a negative feedback loops from deflation.
“But we know well that we don’t yet see such negative effects,” Belka said in defense of corporate investment inclinations.
“But as long as the economy rises, as wages rise, it means that consumption will rise, and the labor market will improve,” he added.
Poland is all the more likely to avoid such negative feedback in that no segment of the economy requires any deleveraging, he noted.
The budget is a lone sufferer on declining prices to date. “Deflation complicates budget creation,” an element “not taken into consideration by our spending rule.”
In its collegiate policy statement, the council added recent reductions in inflation forecasts abroad as a new factor creating uncertainty in the price outlook, but maintained its view that CPI is slowly returning into the positive territory.
Poland’s MPC held interest rates flat at the council sitting con concluded Tuesday, fully in line with market expectations and its own policy vows.