WARSAW, Jan 12 (Reuters) – Double-digit inflation in Poland leaves no room for loosening financial coverage this 12 months however rates of interest won’t rise additional, central banker Ludwik Kotecki advised Reuters.
With the principle rate of interest staying at 6.75% for a fourth month in a row in January and inflation for December coming in decrease than anticipated, markets’ focus has turned to when the Nationwide Financial institution of Poland (NBP) might begin loosening coverage.
“I imagine that the Financial Coverage Council won’t elevate rates of interest this 12 months, however on the similar time I don’t see room to decrease them in 2023,” mentioned Kotecki, who’s a member of the central financial institution’s rate-setting financial coverage council.
Kotecki mentioned even speaking about decrease charges in the meanwhile risked weakening the affect of financial coverage.
Kotecki’s views observe feedback final week by Central Financial institution Governor Adam Glapinski, who mentioned he remained hopeful a charge reduce might occur this 12 months, regardless of nonetheless rising inflation charges.
A statistics workplace flash estimate confirmed that inflation was 16.6% in December. Kotecki mentioned that in 2023 common annual inflation shall be round 14%, and it’ll peak in February at round 20%.
After that, the value development charge will steadily lower and on the finish of the 12 months it could stabilise at a decrease, however nonetheless double-digit degree of 11-13%.
“Then what about rates of interest? Nothing. The MPC has de facto ended the hike cycle, though formally it’s in a section of financial coverage tightening. Speaking about charge cuts in the meanwhile is, in my view, a communication error,” that weakens the affect of financial coverage, he mentioned.
“It’s like taking pictures your self within the foot. Look what the Fed or the ECB are doing. They’re intentionally exaggerating about how hawkish they are going to be, and we, pretending to be hawks, say that in a second we shall be doves,” he added.
Kotecki believes that inflation will nonetheless be removed from the inflation goal of two.5% plus or minus one proportion level in 2024 as properly.
“In my view, in 2024 inflation within the base situation will nonetheless be round 10%. I do not actually know why it should not be like that. However in terms of 2024, we’ve much more unknowns,” he mentioned.
Reporting by Pawel Florkiewicz; Modifying by Frank Jack Daniel
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