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The governor of the central bank of Poland has rejected short-term concerns about inflation, even when other central banks in the region have begun to raise interest rates to combat rising prices.
Adam Glapinski said the data was currently not “worrying”, noting that inflation was partly driven by transient and external factors, such as base effects and fuel prices. Currently, the second highest rate in the EU, Polish year-on-year inflation reached 4.7% in May, before falling to 4.4% in June.
“When we subtract from the headline inflation the impact of regulatory factors and supply we get inflation close to 2.5%, which is the midpoint of our inflation target,” he told the Financial Times. “So at the moment there is no cause for alarm, especially because we also expect general inflation to fall.”
Inflation has bounced in many countries, as pandemic restrictions are removed, prompting some economists to call on central banks to liquidate stimulus measures taken during the crisis. The central banks of Hungary and the Czech Republic raised rates last month.
Glapinski said the central bank, Narodowy Bank Polski, would watch “very carefully” for signs that rising wages would raise prices as the economy accelerates after the pandemic closes. He expects Poland’s economy to grow by more than 5% next year.
“If we see that there is a trend that in a few quarters this rise in prices can be driven by these factors on the demand side, we will act. When will it happen? It’s hard to say exactly, but not before in the fall of this year. Or maybe just halfway through next year, ”he said.
Adam Glapinski says inflation is partly driven by transient factors such as base effects and fuel prices © Piotr Malecki / Bloomberg © Bloomberg
“Our approach is similar to that of the Federal Reserve or the ECB: we hope that the economic recovery will be certain and solid, and then we will see if there is a risk of rising inflation. And we will certainly not doubt it: we will act immediately as soon as necessary ”.
Some economists argue that the BNP should already take steps to tame inflation, as the Polish labor market shows signs of tension. Unemployment, which accounts for 3.8 percent of the workforce, is among countries lowest in the EU, according to Eurostat.
“We have a very low unemployment rate, which is putting pressure on wages. And besides, the Polish treatment [a government programme of tax and spending pledges] will increase demand, “said Alicja Defratyka, economist at ciekaweliczby.pl.
He added: “I think inflation is likely to be between 4.5 and 5% by the end of this year, and could be even higher if all the measures proposed in the Polish Treaty come into force.”
Glapinski said the BNP had “no specific concerns” about the labor market and that the entry of workers of neighboring Ukraine and Belarus “would certainly be enough to meet the growing demand for labor” in the coming years.
“Of course, we see if there are bottlenecks in the labor market, but at the moment we do not have any excessive pressure on wages. Wages are rising, but more slowly than labor productivity. Unit labor costs do not increase, ”he said.
He added: “The worst thing that could happen would be a wage price spiral, but this risk is very limited. We don’t have it, and at the moment we certainly don’t see it in the coming quarters. We don’t see it happening next year either.” .
Economists have also expressed concern about the ultra-weak monetary policy that fuels the bubbles in the real estate and financial sectors. However, Glapinski said that Polish banks had a good capitalization and that the real estate market was not overheating.
“At the moment there are no signs of bubbles in the real estate sector that are fueled by low interest rates. And we don’t expect it, “he said.
“Keep in mind that these low interest rates have only been established for a relatively short time and, according to market expectations next year, we will already be starting to leave this territory. And real estate cycles are much longer.
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