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Wednesday, July 24, 2024

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Central bank hikes rates to fend off rising inflation

oland’s Monetary Policy Council (RPP) has hiked the central bank’s (NBP) reference rate by 0.75 percentage points to 1.25%. It is the second time in the past month when the NBP increased the reference rate to fight against inflation. 

The  activity in  global economy continues to  recover,  yet a difficult pandemic situation persisting in many countries together with supply-side constraints in some markets and a strong  increase in commodity  prices, have a negative impact on the economic situation in some countries. Still, latest forecasts indicate a further increase in global GDP next year. At  the  same  time  a markedly  higher  than  a  year  ago commodity  prices –in  particular prices of natural gas, but also of oil and coal, as well as of some agricultural commodities – together with continued global supply chain  disruptions and significant  increase  in international shipping costs, contribute to a marked rise in inflation in many economies and an upward shift in its forecasts for the next year. 

In many economies, including in the USA and euro area, inflation significantly exceeds the central banks targets, staying at the highest levels in many years. Major central banks are keeping interest rates low while  continuing  asset  purchases, although some of them signal the reduction in the monetary accommodation scale. At the same  time  central  banks  in  the  Central-Eastern Europe region have been increasing interest rates. 

In Poland, economic activity continues to recover. The situation in the  labour market is still improving,  as indicated by decreasing  unemployment and a marked increase in average wage in the enterprise  sector. In  the coming quarters, economic  conditions are expected  to  remain  favourable. However  there  are  significant  risk  factors  related  to  the impact of autumn wave of the epidemic on the economy, as well as to the effects of  supply-side constraints and high energy commodity prices on the global economic conditions.

Inflation  in  Poland,  according  to  the  Statistics  Poland  flash  estimate  for October2021, increased to 6.8% in annual terms, and in monthly terms it amounted to 1.0%. The elevated inflation resulted, to a great extent, from external factors beyond the control of domestic monetary policy, such as higher than a year ago global prices of energy and agricultural commodities, earlier increase in electricity prices and in waste disposal charges, as well as disruptions in global supply chains and international  transport. The  ongoing economic recovery, including demand driven by rising  household  income, has also added to the price growth. 

Source: National Bank of Poland

Sylwia Ziemacka
Sylwia Ziemacka
“I believe our unique selling point is that we focus on what brings us together. Poland Weekly offers something you will not find anywhere else: a truly international and unifying perspective focused on content that builds cooperation and mutual understanding. This attitude doesn't make us naïve, but it allows us to focus on mutual understanding and a search for solutions. There are so many new challenges that we are all facing, such as energy transformation, climate change and supply chain disruption, to name but a few. By working together and sharing good practices, we can achieve so much more.”
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