Has the cycle of interest rate cuts begun for good? Chairman Glabinski comments on the Monetary Policy Committee’s decision

In October, the Monetary Policy Board cut interest rates by just 25 basis points. Analysts were betting on a range between 25 and 50 basis points, although in reality we could have expected anything after the latest dramatic decision by the Council.

From October 2021 to October 2022, there was a cycle of interest rate increases in Poland. During this period, the reference rate of the National Bank of Poland was raised from a record low of 0.1% to 6.75%. It maintained this level for 11 months. It was also the most dangerous cycle of monetary policy tightening in Poland in the 21st century. Meanwhile, the National Reserve Bank’s reference rate remains below the level of CPI inflation over the past 12 months. This means that since 2017, Poland’s real interest rate has remained permanently negative.

Chairman Glabinski explains the MPC’s decision

It has already become a tradition that the day after the decision on interest rates is made, the President of the National Central Bank comments on the choice of the Board. Last month, Adam Glapinski “ceremoniously scrapped high inflation,” so what can we count on now?

Inflation, ladies and gentlemen, is falling fast

In the past five months, prices have not increased, in the past five months prices have decreased slightly. Over the past six months, prices have remained roughly the same.

Let me say it briefly for non-economists, CPI inflation, which is the headline inflation that we report, fell from 18.4% to 8.2% from February to September. This is an unusually rapid decline of more than half. For ordinary people, the most important fact is that inflation has remained roughly the same for half a year.

A month ago came the moment when we stopped existing in the world of high inflation (…). We are in a world of moderate inflation. (…) We are moving very quickly towards creeping inflation, which under normal circumstances is not noticed by citizens unless it comes to food supplies only.

Our target is 2.5% inflation.

We will strive towards 2.5% with the same intensity. Once we reach the permissible deviation margin of 2.5% (+1%, editor’s note), we will go home. Inflation is 8.2%, wait, next month it will be 7%. +With something+. At the end of the year, it will be between 6 and 7 percent. (…) In the middle of next year it will reach 5%, which means that we will already reach creeping inflation.

We are witnessing great success, and I regret that this success has come now before the elections

Inflation is skyrocketing. It seemed impossible to those smart heads from the TV studio with their educational names and titles. (…) They want to harm Poland and they simply lie 24 hours a day, without stopping. They did not realize that high inflation had ended in Poland.

We don’t know what will happen

The economic situation is bad all over the world. Our main partner in Germany has experienced a recession. This is a conversation about risks and threats.

What is the impact of lower fuel prices on decreasing inflation from 10% to 8.2%?

This is 0.0%, I say this despite all the media. This is the data. We have the largest analytical team in Poland, and one of the largest in Europe. We hire geniuses, buy the best databases and do our own research.

We are not miracle workers

And it all comes together to beat high inflation. In some countries things are going faster, in others more slowly, but the trend is the same.

We have reduced the reference rate by 25 basis points.

Data released over the past month confirm that we have defeated the inflation hydra. (..) Yesterday’s interest rate decision does not indicate the situation today, but rather only affects the situation in several aspects. These rates are higher than the inflation that there will be. Our rates are still high. And in these few quarters, these will be the real interest rates. At the same time, demand pressures began to weaken and the low inflation scenario assumed by the National Bank of Japan became a reality

Within 7 months, inflation had fallen by more than half

Please show me another case like this. (…) The level of inflation is now lower than our previous expectations. We must add that they are very conservative. We also have the best forecasts.

In September, the dynamics of all major categories of the inflation basket decreased

All types have lower dynamics, not only energy and food, but also more importantly, and what we have been waiting for for a long time, core inflation, that is, after eliminating those factors that seem to be exogenous. Fuel had no effect on lowering inflation.

We do not wish for unemployment, but the recovery will be gradual

The economy is performing slightly worse than in our July forecast, but fortunately, inflation is also slightly lower. This is a result of the protracted economic downturn in Germany, our main partner. (…) There should be a slight increase in GDP this year throughout the year. Very small but light in stature. There may be a slight slump, which is not a problem, but a slight uptick is expected.

Within 10 years we will be richer than France and the United Kingdom. Britain

Just a little, but we will be much richer than countries like Spain or Italy. Italy is an unfortunate victim of joining the eurozone.

BPL/PAB