Marek Belka (right) with José Manuel Barroso, president of the European Commission. Image by Getty
The debate over monetary policy’s limits is, once again, big news.
In recent weeks, Sir Mervyn King, governor of the Bank of England, and his deputy governor for monetary policy, Charlie Bean, have both questioned the usefulness of more quantitative easing. On Thursday, the Monetary Policy Committee halted bond-buying, suggesting the majority agrees with the Bank’s top brass.
It is clear that the MPC now believes that it is running out of options, at least as far as “normal” policy is concerned.
But what is normal? Sir Mervyn has always considered quantitative easing an orthodox monetary policy. Marek Belka, president of the National Bank of Poland, disagrees. Read more
A rate rise was a serious option at the last meeting of Poland’s monetary policy committee. Minutes reveal that policymakers held a vote on a quarter point rate rise, but that the majority voted against it because of heightened doubt over growth, coupled with low drivers of aggregate demand (such as high unemployment and low wage pressure):
The majority … represented the view that recent data increased the uncertainty regarding economic growth… Further arguments in favour of this decision included the persistently high unemployment rate and modest wage pressures in the enterprise sector, both reducing the risk that heightened inflation, which up to now has resulted from factors beyond the direct influence of monetary policy, should persist. Furthermore, in the opinion of some Council members, NBP decisions on interest rates should take into account the monetary policy pursued by major central banks, in particular the European Central Bank.
The zloty has fallen against the euro after Poland’s central bank decided to keep rates on hold. A large minority of analysts had expected a raise, following above-target inflation data, plus last month’s decision to increase rates 25bp, the first such move since the financial crisis. Signals from the Bank itself had been mixed.
(This paragraph is an update 1530 GMT) Comments from the central bank governor suggest this is a pause rather than a change of heart. “Some members of the Monetary Policy Council saw the January hike as the start of a cycle and I am one of them,” governor Marek Belka told a news conference. Read more
Disagreement seems to be a public affair at Poland’s central bank. Where other rate-setters cloak their positions or votes in secrecy, Poland’s 10-strong rate-setting council give their diverging views quite openly. This may well be a smart move.
Today, two opposing views were added to an almost exhaustive list of policymakers’ views. Anna Zielinska-Glebocka gave possibly the most hawkish assessment to date, warning of a race against time to beat rising core inflation. Asked by Reuters whether another rate hike may come as early as the MPC’s next sitting on March 1-2, Ms Zielinska-Glebocka said: “I wouldn’t want to say what we will do in March … It seems there is a need to tighten monetary policy. The depth of tightening will be decided by many factors.” Her bullish sentiments follow comments from Jerzy Hausner and Jan Winiecki, both concerned about inflation and eyeing further rate rises.
But balancing that view was Read more
It’s time for Poland to begin tightening – and we’re not talking a one-off rate rise, either. Central bank governor Marek Belka told Reuters today that it was time to begin a gradual monetary tightening cycle to help strengthen the zloty and cap inflationary expectations.
“The time for observing the situation in monetary policy is ending. I definitely believe that rates should be raised pre-emptively, not just in case,” Mr Belka told Reuters. Asked whether the rate rise could take place this month, Mr Belka replied: “If other “Irelands” happen then a rate hike would not achieve its goal and would not initiate zloty appreciation. For such a hike to initiate this process and be effective, it must take place at a time of stable markets.”
Mr Belka’s comments follow earlier hints, plus several bullish statements from colleagues on Poland’s monetary policy council. Read more
Hawkish comments from Poland’s central bank governor, following ambiguous data from the last minutes. The Bank kept its reference rate on hold at 3.5 per cent, as expected, but comments from Marek Belka suggest a rate rise is on the horizon.
Commenting on what he said was a decreased risk of strong capital inflows into Poland in the event of an interest rate rise, Reuters reports the governor telling a news conference: “This changes slightly the risk balance in favour of rate hikes or in favour of the start of a tightening cycle.” Mr Belka also reiterated his view that the Polish zloty has strong potential to appreciate. Read more
Poland’s latest minutes show something interesting, but we lack the information to interpret quite what. At the last rate-setting meeting, the Polish central bank held rates. Minutes just released showed that, as is now the norm, “some members” proposed a 50bp increase in the refinancing rate. This time, however, in addition, “some members” proposed a 25bp increase as well. This did not happen last time.
Minutes do not divulge who these members are, or even how many of them there are. Thus we cannot figure out whether one 50bp rate-rise proponent has softened their view, or whether all 50bp-rate-rise advocates stood firm, and someone who previously voted for a rate hold is now in favour of a rise. It’s a change, but whether it’s bullish or bearish compared to last month, we cannot tell. The most we can surmise is that at least two members of the ten-strong council are in favour of raising rates. Read more
Rates have been held today by Poland’s central bank, but some additional liquidity will be drained from the system by the decision to increase the amount of capital banks have to keep with the central bank. The reserve ratio will be increased from 3 to 3.5 per cent, the bank said, via Google translate.
No further information was given as the press conference hasn’t happened yet.
Poland’s central bank will aim to keep annual inflation as close as possible to its target of 2.5 per cent, rather than targeting a range of 2.5 per cent ± 1 per cent.
The shift in emphasis was mentioned in an assumptions document in the Bank’s 2011 Monetary Policy Guidelines. “Monetary policy is clearly targeted at keeping inflation closest to the 2.5 percent target rather than inside the wider range (of 1.5-3.5 per cent),” reads the document according to a Reuters translation. “This solution allows for the anchoring of inflation expectations,” says the document (via Google Translate), “[which] are not yet anchored sufficiently low.”
Polish news agency PAP reports, via Business Week: Read more
Minutes from Poland central bank show some MPC members favoured a rate rise at the August 24 meeting. A motion to raise rates by 50bp was put to the vote and rejected; the refinancing rate remained at 3.5 per cent.
From the minutes:
While considering the decision on interest rates, some Council members argued that the present GDP growth, with a possibility of its acceleration and a likely reduced potential output growth, could contribute to a rise in inflationary pressure in the monetary policy transmission horizon. Those members emphasized that the current level of interest rates was adequate for a situation of strong slowdown in the growth of the Polish economy and the recession in its environment, and that given recovery gaining strength in Poland it was justified to increase the NBP interest rates. Read more
Slightly more bullish than last month: this is what we can glean from minutes just released of the Polish central bank’s June 30 meeting.
While the council settled on holding rates constant, this month “some members … indicated that interest rates in Poland were running at a level lower than the natural rate for the Polish economy. According to those Council members further economic recovery and a growing risk of inflation running above the NBP inflation targetmight speak in favour of raising the interest rates.” There was no mention of these bullish views in last month’s minutes.
The new head of Poland’s central bank says inflation could rise above 3.5 per cent, a percentage point above target. Dow Jones reports:
The Monetary Policy Council of the National Bank of Poland Wednesday dropped its informal neutral policy bias from its interest rate meeting statement and sees new upside risks for consumer price inflation, central bank Governor Marek Belka told a press conference Wednesday…. Read more
Poland’s government can expect tough scrutiny of its efforts to cut the budget deficit from Marek Belka, the country’s new central bank governor.
In an interview with the FT today, Belka says: “I will remind the government to keep its promises.” For Belka, a deficit hawk and a former Polish prime minister and finance minister, even the 3 per cent budget deficit target of the Polish government and many other European countries is not ambitious enough.
“We should not forget that the growth and stability pact talks about 3 per cent not as a goal but as a maximum,” he says. “The real goal is a balanced public sector budget over the economic cycle. Over the longer term we should be aiming at a surplus.”
For Belka, the model of fiscal probity is Germany, Read more
Former prime minister Marek Belka has been voted in as the new governor of Poland’s central bank, by a clear majority in the lower house (253 to 184). Mr Belka is a well-known international figure, serving as the IMF’s director for European Department since 2008. Prior to that he was under-secretary general at the UN and executive secretary of the UN Economic Commission for Europe.
Mr Belka replaces Sławomir Skrzypek, who was killed in the Polish air disaster in April, and his deputy Piotr Wiesiolek had been acting governor. Read more
The National Bank of Poland today announced (as expected) that it would hold its policy rates for the eleventh straight month.
No surprise, though the country is suffering with above target inflation. But few European countries (notably Norway) have raised rates, and the eurozone crisis is causing others, who may have been on the cusp of following suit, to hold off. Read more
A tiff between the Polish finance ministry and the central bank has been resolved today – in the ministry’s favour. The flexible credit line, which was put in place this time last year, cost the country about $50m a year for the right to call upon $20.58bn (at ?). Poland did not intend to use the facility, and indeed they did not use it last year; theirs was the only economy in the EU not to suffer a recession. The central bank has said the country’s $85.2bn currency buffers would be sufficient in case of financial woes. But in light of Greek contagion, market fear seems to outweigh the fundamentals, in which case this extension is prudent.
The zloty is too high, even though recent intervention by the central bank has helped to weaken the currency to levels last seen a month ago. So says Polish deputy finance minister Ludwik Kotecki.
“At this stage of the recovery, the zloty is probably too strong and for sure further appreciation of the zloty should be avoided,” Mr Kotecki told Bloomberg in an interview on April 17 in Madrid. “The recovery is not well grounded and risks still exist. Too strong a zloty would be negative.” He declined to speculate on what the optimal exchange rate would be for Poland’s economy. Read more
The president of the Polish central bank was among those killed in Saturday’s plane crash, which also killed the country’s President and religious and military elites. Slawomir Skrzypek will be replaced by the bank’s deputy, Piotr Wiesiolek. The 10-member monetary policy council will also be managed by Mr Wiesiolek. Although his views are not well known, no significant change is expected at the bank. Forty-six-year old Mr Wiesiolek is a former banker specialising in asset management, who also has international central banking experience. Click on his photo for his official biography. More on the likely policy effects of this tragedy from Jan Cienski.
Bullish sentiment from Polish central bank governor Slawomir Skrzypek. Bloomberg reports him saying that Polish rate setters should “start to think about tightening monetary policy” since the central bank’s own forecasts show inflation accelerating to 3.5 percent by 2012. This is in contrast to some bearish sentiment last week from the newest members of Mr Skrzypek’s rate setting council.