Wednesday, July 30, 2008
The Monetary Policy Council has been struggling for nine months to bring down the inflation rate, at a four-year high of 4.6 percent in June, to its 2.5 percent target. Slower-than expected employment growth, retail sales and industrial output in June indicate the economy is losing steam and the central bank said this may damp inflation. Annual wage growth in Poland's corporate sector accelerated to 12.0% in June, above forecasts and up from a 10.5% rise in May. On the month,average wages were up 4.8%, following a 2.2% monthly decline in May. Total employment at firms with more than nine employees was running at 5.39 million in June, up 4.8% on the year. That annual rise was below the February peak of 5.9%, and suggests job creation in Poland is now starting to slow.
The economy expanded an annual 6.1 percent in the first quarter, down from 7.3 percent at the beginning of last year and 6.4 percent in the fourth quarter.
The 10.8 percent rise of the zloty against the euro, which has converted the zloty into the world's second-best performing emerging market currency this year, has also helped keep inflation in check. The June inflation rate of 4.6 percent was driven mainly by a 3.3 percent monthly gain and an annual 7.5 percent advance in fuel prices, which policy makers cannot control.
Friday, July 25, 2008
Policy makers at the Polish central bank have lifted borrowing costs by 2 percentage points since April 2007 as wage growth and higher consumption have kept the inflation rate above the central bank's target of 2.5 percent for the last nine months.
Saturday, July 19, 2008
According to data released by the Polish statistical office Poland's industrial output rose 7.2 percent year-on-year in June (see chart above), while the rate of increase in producer prices held constant at 2.7 percent year-on-year (see chart below).
Folllowing publication of the data Monetary Policy Council member Andrzej Slawinski is quoted as saying that the level of interest rates would now largely depend on the zloty.
"What is going to happen with the interest rate level will largely depend on the changes in the zloty exchange rate," Slawinski, seen as a moderate on the 10-member MPC, speaking to TVN CNBC.
The zloty - which was little changed after the data - has gained almost 4 percent against the euro in July alone and is up more than 10 percent since the start of the year.
Poland's Monetary Policy Council has raised rates eight times since April 2007, bringing the key rate to the current 6.0 percent in response to the booming economy, growing inflation and a tight labour market.
June consumer inflation stood at 4.6 percent year-on-year, above the central bank's 2.5 target.
However, not everyone is convinced about the inflation outlook, and Halina Wasilewska-Trenkner, a hawk on the 10-strong policy panel, told daily Rzeczpospolita during last week that although the zloty was probably too strong it was difficult to determine the level of excess, and hence the bank should continue to tighten monetary policy.
"Maybe growth is not as dynamic as last year but it is still robust growth," she said.... "I think that in the second quarter it could have been at about 5 percent but there is still a chance that the result for the whole year will be slightly higher. I believe that we should tighten monetary policy more,"
Also monetary policy maker Dariusz Filar argued on Friday that the Polish central bank should immediately raise its main interest rate by at least a quarter of a percentage point to cap inflation. The new core inflation rate, introduced three months ago, and which strips out food and fuel prices (thus giving a better reading on the state of domestic demand) - was probably a "bit too high'' in June (at 2.2 percent) and thus Narodowy Bank Polska's 6 percent seven-day reference rate was not enough to adequately cap price growth.
``That's why an immediate reaction is needed,'' Filar said in an interview on Friday in Warsaw. ``Waiting too long with a change of interest rates may cost us in the future in the form of a higher inflation rate.''
Central bank policy maker Halina Wasilewska-Trenker has also added her voice to the debate. Wasilewska-Trenker stated in an interview with a Polish news agency this weekend that Poland's 6 percent interest rate should be raised as slower-than-expected industrial output data last month provided no proof of an economic slowdown. ``Eonomic growth is still robust,'' ....Poland is ``far from a rapid slowdown,'' she added.
Monetary Policy Council member Marian Noga also feels the Polish central bank should raise interest rates even as economic growth slows because accelerating inflation is only going to prompt demands for higher wages. Noga alos expects freeing energy prices as of next year will drive up inflation to almost 5 percent in January before slowing to below 3.5 percent in the middle of 2010.
``The faster-than-expected economic slowdown would have dismissed the need for interest rate increases if wages hadn't risen at such a quick pace,'' said Noga in a July 18 interview. ``Since second-round effects have emerged, policy tightening must be continued.''
``We realize that our decisions impact on the zloty but it can't be an obstacle for us,'' Noga said. ``It's not the zloty behind the slowdown, but the weakening global economy.''
Poland's Monetary Policy Council has ten members in total.
Wednesday, July 16, 2008
Poland's Monetary Policy Council have raised borrowing costs eight times in the past 14 months as accelerating wages and falling unemployemnt have fuelled consumption and kept inflation above their 2.5-percent target since last October.