No bias at the RPP

The Monetary Policy Council (RPP) - the National Bank of Poland's interest-rate setting body - has indicated that starting from 2006, it will discontinue its practice of declaring monetary-policy biases.

Up to now, the RPP had used a declaration of an 'easing', 'neutral' or 'restrictive' bias as a tool to communicate to the market which way it was leaning with regard to future interest-rate cuts or rises. It is one of the main indicators used by economists for an insight into how the members on the Council viewed the economy's prospects.

RPP Member Dariusz Filar said the bias had become a "straightjacket." Confusion over how to interpret the bias "led some participants of the market to believe that in fact adopting a bias is some kind of an obligation to increase or reduce rates," he said.

According to Bartosz Pawłowski, an economist at ING Bank, contradictory statements in the media from individual members of the council send a garbled message, and the bias was the only clear statement economists could rely on.

"You have many different opinions which are flowing to you every month. And they are sometimes contradictory because there are 10 people [on the council]," he explains.

Now, he says, economists will have to depend on the comments which accompany each of the Council's decisions.

"Last time [the statement] was two or three pages with almost raw data from the statistical office - there were some comments, three sentences maybe about the risks to inflation. If there is no improvement in the comments then we will somehow be, maybe not blind - but it will be much more difficult for the markets."

Filar responds that starting next year, the RPP will include a "balance of factors influencing future inflation" assessment. "It is our intention to put much more stress on such a balance after every meeting and in every inflation report," he says.