Polish central Bank governor says rate-hike cycle likely

The National Bank of Poland's NBP is likely to continue its cycle of interest rate hikes until it makes sure inflation is going down permanently, the governor of the NBP has said.

Adam Glapinski said in a statement written for the World Economic Forum in Davos and published by the NBP's Obserwator Finansowy website on Monday that the Polish economy could be affected by unexpected global events in the near future and the central bank would have to take such developments into account when making decisions.

Glapinski said that the Monetary Policy Council, the NBP's rate-setting body, embarked on a rate-hike cycle in October 2021, which he said would probably be continued in the coming months until inflation is permanently lowered. At the same time, we want to bring inflation down to the target, but because of its largely supply-side nature, we want to calibrate the pace of monetary tightening so that we don't do too much social and economic harm, Glapinski said.

The NBP's official inflation target is 2.5 percent plus minus one percentage point, but the latest reading for April showed prices of goods and services increased by 12.4 percent compared to the previous year. The reference rate of the NBP is now at 5.25 percent after a series of hikes.

However, according to Glapinski, Poland is well-positioned economically to meet any challenges, with economic sentiment still high despite inflation and a tense geopolitical situation.

The governor noted that Poland's GDP growth exceeded 8 percent year on year in the first quarter of 2022, while unemployment was very low and wages were rising at a double-digit pace.

Glapinski said that the strength of our economy is a result of the war behind our eastern border and that it's important to maintain strong economic growth with record low unemployment.

The World Economic Forum, which started in Davos, Switzerland, is expected to focus on problems caused by the war in Ukraine, the Covid 19 Pandemic, climate change and economic crises.