Falling inflation should be encouraging, but we cannot get used to it. The president of the NBP spoke about a possible rebound, and was supported by Ludwik Kotecki, a member of the Monetary Policy Council.
Poland will face a period of low inflation, after which it will increase to approximately 5-7% y/y, predicts Ludwik Kotecki, member of the Monetary Policy Council.
– We are facing a period of low inflation, but after it, unfortunately, we return to this unpleasant normality, i.e. increased inflation at the level of probably 5-7%, maybe a little higher, but I would put the upper limit around 7%. It all depends on these famous shields, which will partially or completely expire during the year – said Ludwik Kotecki on Tok FM.
Inflation will be very low in the first quarter and will then increase, especially in the second half of the year, he added.
During yesterday’s press conference, the President of the National Bank of Poland (NBP) and the Chairman of the Monetary Policy Council, Adam Glapiński, said that inflation may fall even to 2.5% y/y in March, but later he expects it to increase, even to 6-8%. As a result, a permanent return to the inflation target (2.5% +/- 1 percentage point) will take place at the end of 2025, i.e. as the central bank had expected so far.
As previously reported by the Central Statistical Office, consumer inflation amounted (according to preliminary data) to 6.1% on an annual basis in December 2023 compared to 6.6% y/y in November. The market consensus was: +6.5% y/y and +0.3% m/m.
Monetary policy cannot respond to inflation fluctuations
Ludwik Kotecki emphasized, however, that monetary policy should not respond to either temporary, one-off increases or decreases in inflation.
– Even a more general principle should apply here, i.e. monetary policy should not react at all to such temporary or one-off actions. We were dealing with an artificial reduction in prices when inflation broke out, and now we will be dealing with an artificial suppression of prices. And such phenomena should not be influenced by monetary policy – Kotecki said on Tok FM when asked whether interest rates should not be reduced in March, after the publication of the inflation projection, or in April, after the publication of March inflation data.