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April 13, 2021
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MPC: NBP policy is right |

During the meeting of the Monetary Policy Council (MPC) on July 14, its members decided that the price growth would decline in the coming months – this results from “minutes” from this meeting, published by the National Bank of Poland (NBP).

MPC: inflation will fall

The lowering of inflation will be driven by significantly lower wage growth than in the previous years, the expected increase in the unemployment rate, intensifying price competition among firms amidst weaker demand, as well as low forecasted inflation abroad. According to those members of the Council, the likely decline in inflation in the remainder of the year is also indicated by the inflation expectations of consumers and enterprises, which have recently lowered “

– we read in “minutes”.

Apparently, not everyone was so optimistic.

“Those members pointed to the recently increased inflation readings excluding food and energy prices, judging that core inflation would remain relatively high also in the coming months. They pointed out that the realization of purchases postponed while the restrictions were in force, as well as a marked increase in administered prices and – potentially – electricity prices, would contribute to a faster increase in prices. In the opinion of those members of the Council, inflation may be additionally increased by higher food prices resulting from a possible agricultural drought and – in the longer term – an increase in the prices of semi-finished products related to a possible deglobalization process ”

– we read on.

“The majority of the Council members assessed that interest rate cuts – through their positive impact on the financial condition of indebted enterprises and households – would support the stability of the banking sector. However, certain Council members emphasized that they might contribute to the deterioration of banks’ interest income. Those members also pointed out that banks may strive to improve their financial results through increases in fees and commissions “

– stated in the document.

The policy of the NBP is appropriate

The MPC also claims that easing the NBP monetary policy helps the economy and mitigates the negative effects of the pandemic:

“As a result, the monetary policy of the NBP contributes to limiting the decline in employment and worsening the financial situation of companies, contributing to faster economic recovery after the pandemic ends. The actions of the NBP reduce the risk of inflation dropping below the NBP inflation target in the medium term and – through their positive impact on the financial condition of borrowers – contribute to strengthening the stability of the financial system ”.

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