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In In 2024, inflation will return to target, regardless of whether inflation targets are maintained or not – announced Prof. Adam Glapiński. According to the NBP projection, the decline in inflation should start as early as this summer.

President of the National Bank of Poland, Prof. Adam Glapiński (© NBP)

– Since October last year, we have raised interest rates a total of 10 times. The benchmark interest rate rose by a total of 640 basis points. This is a very decisive tightening. You remember when I came to the conference and said that we are all hawks and we were hawks and we still are. It’s hard to say what will change in flight now. We’re waiting for the economy to respond to what we’ve done – stated the President of the National Bank of Poland, Prof. Adam Glapiński at the conference the day after the Council raised interest rates by 50 basis points.

– We are ready for further action at any time. Coincidentally, there is now a break in MPC meetings (…) After the summer holidays we will see how it goes. If we have to keep raising rates, if inflation grows we will raise rates, but the report shows such a picture that the peak of inflation is most likely during the summer holidays and from this inflation peak we will slowly go down . – explains the chairman of the NBP.

Slides presented at the conference show NBP analysts will see 14.2% CPI inflation in 2022; 12.3 percent inflation in 2023 and 4.1 percent. inflation in 2024. This data reflects the central path of the July projection.

NBP analysts expect 14.2%. inflation in 2022; 12.3 percent in 2023 and 4.1 percent. in 2024

If the anti-inflation shields were maintained until the end of 2023, inflation would be 13.6% and 9 percent respectively. and 7.9 percent If shields were maintained through the end of 2024, inflation would be 13.6% and 9 percent, respectively. and 4.1 percent

The GDP forecast explains the growing reluctance to tighten monetary policy against such an inflation projection. From the statement after the MPC meeting, we know that there is a 50% chance that GDP growth will be between 3.9-5.5%. in 2022; 0.2-2.3 percent in 2023 and 1.0-3.5 percent. in 2024.

– The fact that we have abandoned the 75 basis points increase and implemented the 50 basis points increase is due to the fact that we are seeing strong indicators pointing to a slowdown, including in Poland. If this delay will be more than 8 percent. and early next year we go to about 2-2.5 percent, as you’ve seen in the projection, this is a radical, sudden slowdown and it should also have a strong anti-inflationary effect — stated the president of the National Bank of Poland when asked if “the Council has already thrown the 75 percentage point increase from its arsenal. Baselines”.

Now comes such a difficult choice. We have a choice between this Scylla of inflation or the Charybdis of unemployment for example. These problems are difficult. The whole world has the problem of having to try these rate hikes when the economy slows – later added Prof. Adam Glapiński.

The results of our projection indicate that at the end of the projection horizon – two years – inflation will return to the upper bound for deviations from our target. Anyway, in 2024 inflation will return to target. And this is true whether the anti-inflation shields are maintained or not – stated Prof. Adam Glapiński.

In 2024 inflation will return to target. And this regardless of whether the anti-inflation shields are preserved.

Earlier, the NBP president specified that, according to NBP analysts’ estimates, internal factors account for no more than a quarter of inflation, and 75 percent. inflation is correlated with external factors, most notably as a result of the Russian invasion of Ukraine.

To appreciate the magnitude of these unexpected shocks, I would like to mention that in June this year, average gas prices in European wholesale markets were almost eight times higher than before the pandemic (…) Coal prices were seven times higher (…) and the price of Brent crude oil more than doubled. Let me remind you that the 1973 oil crisis was nothing compared to what is happening now – said Prof. Adam Glapiński.

The conference took place on July 8, when a lot was happening in the foreign exchange market as well. Early in the morning, the EUR/USD exchange rate nearly approached 1:1 parity, the euro cost PLN 4.76 and the dollar was the most expensive in recent data collection history, temporarily crossing PLN 4.80.

In connection with the above issue, the question was raised whether the intervention of the Polish central bank in the foreign exchange market was to be expected. Do I see any reason to intervene – not today, if there was an intervention it would already be there, it would already be visible. I don’t know what it will be like. Not today. But we reserve the right to do so – said the chairman of the NBP.

The statement after the MPC meeting also ends with the view that “the NBP may intervene in the foreign exchange market, in particular to limit fluctuations in the zloty exchange rate that are not in line with the monetary policy pursued”.

Concluding his speech, Prof. Adam Glapiński made it clear that as long as he held the position of president of the National Bank of Poland, Poland would not join the eurozone.

You can watch the entire conference here

President of the National Bank of Poland, Prof. Adam Glapiński (© NBP)

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