In his article for “Dziennik Gazeta Prawna”, Adam Glapiński, NBP president, defends low interest rates. and forecasts that in 2021 we will see a drop in inflation.
Glapiński defends low interest rates.
“Although lower interest rates in the short term lower the banks’ results on the interest margin and force the sector to adjust, they do not lead to a reduction in loan supply or to threats to the stability of the financial system”
– wrote Glapiński.
In his opinion, low interest rates. that’s not cause for concern.
“The second argument made by representatives of the banking sector is that low interest rates can cause the so-called asset bubbles. However, the assessments formulated by the Financial Stability Committee do not indicate that such a risk has appeared. There are currently no imbalances in the real estate market that could pose a threat to macroeconomic or financial stability. At the same time, the experience of central banks shows that if such risk appeared in the future, macroprudential policy would be an adequate tool to limit it.
Inflation will start to decline
He is also of the opinion that “next year we will probably expect a further decline in inflation, which in the current macroeconomic conditions is not surprising ”.
“Therefore, in post-crisis conditions, deflation or permanently low inflation would not be beneficial for the economy and could extend the period of return to rapid growth, including generating macroeconomic costs in the form of higher unemployment “
– he thinks.
Not surprisingly, it also defends the NBP decisions made by the bank since March:
“We reacted to the strong recession and the expected drop in inflation by decisively and quickly loosening our monetary policy. We lowered interest rates, including the reference rate by 1.4 percentage points. to the level of 0.1 percent, moreover, we launched a purchase on the secondary market of Treasury securities and debt securities guaranteed by the State Treasury. “
He also believes that the worst is behind us, although he sees some dangers:
“Economic activity is still below its potential, unemployment is higher than before the crisis, and further progress in the recovery may be more difficult than before. also the government’s anti-crisis programs will gradually fade awaythat sustained the financial situation of many companies and households. Finally, uncertainty about the further development of the pandemic and the economic situation persists, and the outlook for inflation points to its further decline. From this point of view, it is clear that monetary policy must remain accommodative. “