At a meeting in late April, the Monetary Policy Council kept the central bank (NBP) interest rates unchanged.
At a meeting on April 29-30, the Monetary Policy Council kept the central bank interest rates unchanged, with the reference (intervention) rate at 5.75%.
The National Bank of Poland (NBP) offers a cautious assessment of the inflationary risk in Poland.
NBP (Monetary Policy Council): The increased year-on-year inflation persisted largely due to the continued strong growth in prices of food and fuels on the global market as well as prices of household services and energy in Poland. The Council still believes that in the near future inflation will stay above the upper limit for deviation from the inflation target and much of the effect will come from the increase in regulated prices. (...) In the medium term, the probability of inflation overshooting the inflation target is still higher than the probability of its running below the target. The Council does not rule out the need to further tighten the monetary policy in order to bring inflation down to the target in the medium term. In view of the increased uncertainty about prospects for global economic growth and for the Polish economy, the Council assessed that a fuller assessment of the inflation outlook would be possible after data to be released in the near future were analysed. The Council will be striving to bring inflation down to the target in the medium term. (Report from the Monetary Policy Council Meeting on April 29-30, 2008).
Assessments from other analytical centres and independent experts.
Gdańsk Institute for Market Economics (IBnGR): In the first three months of the year inflation accelerated significantly. In the year to March prices of consumer goods and services grew by 4.1% on average. At the end of March inflation was at 4.1%, 06 percentage points above the upper limit for deviation from the inflation target set by the Monetary Policy Council. Inflation accelerated as a result of a continued fast increase in wages, coupled with a rise in the number of jobs, and high energy prices. In the 1st quarter the fastest growing prices were those of food (7%), transport (6.9%) and household services and products (5.9%) (IBnGR Report entitled “The State and Projection of Economic Conditions,” April 22, 2008; www.ibngr.edu.pl)
Tadeusz Chrościcki, independent expert: The United Nations Food and Agricultural Organisation (FAO) has predicted that global food prices may grow by 10-15% this year. The production of biofuel crops will contribute 25-30% to this growth while the remaining effect will result from natural disasters and increased demand for food in India and China. In the next years one can hardly hope for the situation to improve because of the fuel crisis, which drives the production of biofuel crops, and growing demand for food in Third World countries. In the years 2008-2010 average annual inflation in Poland will exceed 4% and then will slow to a level consistent with the Maastricht criterion. (See: Experts’ commentaries published on www.pte.pl. The commentaries of NRK experts have been published by the “Nasz Rynek Kapitałowy” monthly, no. 3/2007, no. 7-8/2007, no. 10/2007, no. 12/2007 and no. 3/2008. This quotation is from a commentary to be published in no. 6/2008 of the monthly)
Inflation, money supply, exchange rates, interest rates
The central bank interest rates as on April 30, 2008:
- reference (intervention) rate – 5.75%
- lombard rate (official lending rate): 7.25%;
- deposit rate: 4.25%;
- rediscount rate: 6.0%.
On the Warsaw Stock Exchange, stock prices are still very volatile after record increases before November 2007, followed by drops in the final months of 2007 and first months of 2008. At the end of April the WIG-20 blue-chip index was by 15.4% lower than at the end of 2007 (at the end of March it was lower by 13.7%). The WIG index of all companies listed on the Warsaw Stock Exchange was by around 16.1% lower than at the end of 2007 (in March it was lower by around 13.7%).
