The Central Bank of Poland could raise its benchmark lending rate if inflation rises, as is predicted, one of the Bank’s monetary policy council members Jerzy Żyżyński, told reporters on Friday. “I know the rules – if we reach the inflation target, then we will have to consider the possibility of a rate hike, meaning when there is a risk of the economy overheating,” Żyżyński told Reuters reporters in an interview. Recently, many economists have predicted that the economy in Poland may have started to emerge from its recent slowdown.
Core inflation remained at 0.0 percent in November, but picked up to 0.8 percent in December, and, according to the Ministry of Economy, it could reach 1.8 percent in January. The central bank, which favours the rise, reportedly has a target of 2.5 percent. However, Żyżyński also cautioned that the rise was still only being considered. “Regarding raising rates, of course, the possibilities are huge in this direction, but for now, given weak demand for credit, this would not make sense,” he added. “[However], if the economy overheats, then one would have to remove the part of the money flow generated by excessive credit. Then rates would have to rise. There is no such need for now,” he added. Żyżyński also said that he was not satisfied with the current rate of economic growth in Poland, as the country has suffered its biggest contraction in investment in more than six years. He said that he would be happy if the economy grew by 3.5 percent in 2017.
The central bank has kept the benchmark rate unchanged at a record low of 1.5 percent, since a 50-basis-point cut in 2015.