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September 20, 2020
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Interest rates should fall to zero – says economist of one of the banks – Blocksats

Interest rates they are already low. Some central banks have even introduced negative rates. One economist is of the opinion that in Poland they should fall even lower.

Interest rates at zero level?

Chief economist at Credit Agricole Bank Polska, Jakub Borowski, told PAP that “There is pa series of arguments for further loosening of monetary policy by the Monetary Policy Council. “

“Starting with exchange rate issues, despite the unprecedented scale of economic shock course the zloty is strengthening and approaching the levels before the introduction of lockdown, with the earlier weakening of the zloty not significant and (…) we did not observe the sale of Polish bonds on such a scale as in 2008 and 2009. At that time we were dealing with a strong capital outflow and a very strong depreciation of the zloty exchange rate, which was partly a correction after its strong re-evaluation before the crisis “

– Borowski said.

Here are the economist’s conclusions:

“(…) the exchange rate channel worked poorly, and in the case of a small open economy, the exchange rate is an important element of stabilizing the economic situation. Given Poland’s strong links within supply chains, the impact of exchange rate depreciation on net exports and aggregate demand will be limited. This is a very important premise for monetary policy easing – by the exchange rate has helped the economy to experience depreciation must be significant and persistent. “

He adds that the Monetary Policy Council will reduce the reference interest rate by 45 bp to 0.05 percent in May.

Shields are of poor quality

In his opinion, anti-crisis shields do not restart the markets again:

“Government anti-crisis packages have proved to be an effective instrument of hibernating employment and stabilizing the situation of companies for the difficult period of falling demand in the coming quarters. Whereas shields, anti-crisis and financial, are not instruments to stimulate investment. (…) These are funds for survival, not for expansion of companies. In this situation, there is a need to further ease monetary policy to support investment. “

There will be a decline inflation:

“We are rebounding next year, but the scale of this rebound will be greater than the depth of this year’s decline, which means a negative output gap. It will be reflected in inflationary trends and should lead to further loosening of monetary policy. We assume inflation annual average in 2021 at the level of 2.7 percent, but it will mainly be conquered by fuel prices – without contribution to this category inflation will be much lower. We forecast that in the first half 2021 core inflation will be slightly above zero. This means that the central bank may expect a slowdown in inflation trends in the coming quarters, which is the basic argument for easing monetary policy. “

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