Key banker says keep interest rates near zero

Earlier in June, Poland kept benchmark borrowing costs at 0.1%, unchanged for more than a year.

Poland should shrug off inflationary fears and keep its key interest rate near zero until its economy fully bounces back, central banker Jerzy Zyzynski said.

Zyzynski, an ally of Governor Adam Glapinski who’s advocating unchanged rates, sought to erase any impression from last month that he was siding with a minority of board members urging for a symbolic hike to 0.25%.

“I’m not going to experiment with any hikes,” he said in an interview. “This year and the beginning of 2022 is a serious test for our economy. The wait-and-see approach, then, is all I can see until the economy achieves pre-pandemic levels.”

With consumer-price growth at the European Union’s second-highest level, expectations were rising in Poland that it would follow Hungary and the Czech Republic which — reacting to accelerating inflation– raised interest rates. But Glapinski poured cold water on that by dismissing the inflation as temporary and doubling down on a pledge to keep borrowing costs at a record low.

“I’m more worried about that noise leading to higher inflation expectations than about inflation,” Zyzynski said, echoing the governor’s opinion that monetary policy isn’t about “any symbolic moves.”

Inflation has shot up to its highest level in a decade.

Glapinski also reiterated that “a significant majority” of policy makers supports the view that price pressure is temporary and beyond their control.

Picking economic growth over quickening inflation means no action on rates for Zyzynski, whose term ends in March, as he won’t be around for “any chance to support” the first rate increase since 2011.

He’s also certain that all inflation outlooks this year will only highlight the “transitory nature” of an economic environment after the pandemic, thus forcing policy makers to withhold from taking action.

Glapinski said on Tuesday that he expects the economy to grow “probably” around 5% this year and “for sure” at the same pace in 2022.

That comes after he said last week policy makers should see strong and undisturbed economic growth as well as elevated inflation over the long-term in order to mull higher interest rates.


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