Inflation and the NBP: Skrzypek takes the stand

National Bank of Poland (NBP) governor Sławomir Skrzypek defended his control of the central bank last week at a meeting of the Parliamentary Finance Commission established to scrutinize recent turbulence at the bank.

Skrzypek was called before the committee after his respected vice president Jerzy Pruski resigned and suggested that the bank was understating inflation forecasts to suit the governor's dovish views on interest rates. Another deputy governor, Krzysztof Rybiński, had already quit earlier in January. The resignations came as strong blows to Skrzypek's reputation on financial markets.

Speaking before the commission, Skrzypek said, "The stability of our financial market depends on the reputation of the NBP. The situation in the central bank is stable. The board works effectively and efficiently. All accusations are unfounded and publicity on that topic does not serve the reputation of the NBP."

When the committee questioned him on the bank's poor inflation forecasting, Skrzypek said, "inaccurate forecasts happen. If all forecasts were always very accurate, economic analysts would be billionaires."

Concerns about Skrzypek's competence surfaced when he was appointed in January 2007, because of his limited experience in finance and close political ties to President Kaczyński and his brother, who was then Prime Minister.

Skrzypek, as a member of the 10-member Monetary Policy Council (RPP), has since consistently voted against raising interest rates, even as the threat of inflation rising above the 2.5 percent target became apparent in Q2 last year. As late as August, Skrzypek was the only RPP member to vote against a rise in rates. He joined the majority in November as inflation was running at close to four percent.