Poland’s rate setting Monetary Policy Council (RPP) should adopt a wait-and-see policy and refrain from cutting interest rates in the autumn, Przemyslaw Litwiniuk, a member of the council, told the news web service Wirtualna Polska.
The reference interest rate now stands at 6.75 percent, following a string of hikes last year made in an attempt to rein in inflation.
But there have been no increases since September, and any alteration to the rate now comes with an increased political factor owing to the upcoming general election, which is due this autumn.
“Certainly, the risks of the election cycle… carry certain threats to the effectiveness of implementing monetary policy assumptions,” Litwiniuk said. “Today we see, for example in the recently-signed budget amendment, a certain loosening of fiscal policy, which according to declarations from the beginning of the year was supposed to be neutral for monetary policy. It seems it will not be neutral.”
“[A]s the RPP has no instruments to interfere with what the government is doing, the RPP should react to what the government is doing with a proper position,” he said. “Today, that is the most cautious approach of wait and see; that is waiting and observing what September and October bring.”
An interest rate cut in the autumn would be a mistake, especially as some the government’s anti-inflations measures, such as ‘shields,’ credit vacations and subsidised loans, have already undermined the restrictive nature of the monetary policy, the rate-setter said.
He added that the council needs to analyse what information will flow in in the autumn on election risks, consumer demand risks and commodity price risks.