19:46 16 March 2020
Post by: WBJ

Interest rate reduction dangerous for the economy: PKO BP

Interest rate reduction dangerous for the economy: PKO BP
Source: Pixabay

The Monetary Policy Council (RPP) is likely to lower interest rates soon. PKO BP economists point out, however, that a potential reduction in the face of a coronavirus pandemic will not only not help the economy, but it can hurt.

According to bank economists, the reduction in rates may significantly disrupt the operation of the credit channel, which in the face of an epidemic is already difficult.

“Moreover, by deteriorating the financial stability of the banking sector, it may deprive the economy of leverage that would allow for faster recovery when the pandemic passes,”  they added.

Economists of the largest bank in Poland suggest that the NBP should act as the European Central Bank.

"The ECB eased capital requirements and enabled banks to use capital and liquidity buffers. At the same time, it introduced the preferential interest rate TLTRO program aimed at lending to the SME sector. An alternative could be the funding for growth program similar to that introduced in Hungary in 2013,” they wrote.


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