Polish growth still seen “very stable” & CPI rising slowly, warranting policy hold

Poland remains on track for very stable growth with a possibility for a “somewhat slower” rise in inflation versus prior expectations, all giving value to Poland’s stable and neutral monetary policy stance, NBP governor Marek Belka told a press conference after the October MPC sitting.

“We look at a longer-term horizon,” Belka said to play down hints of slowdown in the latest high-frequency data. “Our projection is characterized by significant stability.”

Inflation might now rise “slightly slower” than previously thought, Belka admits, but it still appears on track to turn positive at the turn of November and December. In its collegiate statement, the council had added a decline in inflation forecasts abroad to its list of risk factors to the inflation outlook.

Poland’s current monetary policy stance plays an important role in maintaining that “moderate but balanced” growth, and “that’s how it should remain,” Belka argued.

Current interest rates, although record-low in nominal terms, “are not very low” in real terms. The stance is rather “neutral,” a neutrality that was maintained as rate cuts matched falling inflation readings. Fiscal policy has likewise been “in principle, neutral” over the past several years, Belka claims.

“It’s a situation in which economic policy doesn’t impede the internal dynamics of the economy,” Belka said. With lending on the rise but without creating bubbles, in the Belka view, current policy “can support the economy by creating stable conditions for growth.”

Poland’s MPC held interest rates flat at the council sitting concluded Tuesday, fully in line with market expectations and its own policy vows. The council reiterated the bulk of its economic outlook.

Poland’s Monetary Policy council last moved on rates with a 50 bps cut in March, at which point it declared a readiness to keep rates on hold indefinitely.

Month by month, views of the current council may merit less and less scrutiny, as eight of the council’s nine regular members end their terms early in 2016. Newly elected President Andrzej Duda will name two of the replacements. Each chamber of Polish Parliament will name three new members, presumably after the late October elections.

ami/ gty

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