The National Bank of Poland's NBP rate-setting body 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, a statement for the World Economic Forum in Davos and published on Monday by the NBP's Obserwator Finansowy said the Polish economy could be affected by unexpected global events in the near future and that the central bank would have to take such developments into account when making decisions.
Glapinski recalled that the Monetary Policy Council, the NBP's rate-setting body, began 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.
The economic sentiment in Poland is still high despite inflation and a tense geopolitical situation, according to Glapinski.
In the first quarter of 2022, the governor noted that Poland's GDP growth exceeded 8 percent year on year, while unemployment was very low and wages were rising at a double-digit pace.
Glapinski said that the strength of our economy is due to the war behind our eastern border and the ability to maintain strong economic growth with record low unemployment.
The World Economic Forum, which started on Sunday in Davos, Switzerland, is expected to focus on problems caused by the war in Ukraine, the Covid-19 Pandemic, climate change and economic crises.