Previous price processes in Poland gave arguments for lowering interest rates, which could occur in July. However, tensions on the Israel -Iran line that affect global raw materials can affect the Monetary Policy Council. Its member Cezary Kochalski notes that “The geopolitical factor can reduce the space for changes in the feet in July”. Despite this, it does not categorically exclude the possibility of careful cutting of 25 PB if the economic situation does not deteriorate.
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Israel-irran war will conquer prices?
Uncertainty regarding the stability of raw materials, including oil, which the conflict in the Middle East has already begun to destabilize, can affect the path of inflation in Poland. A member of the Monetary Policy Council is afraid that The dynamics of events in the region may destroy the disinflation process, which in recent months indicated the possibility of achieving the inflation target of the NBP (from 1.5 percent to 3.5 percent) even before the end of the year.
– Additional, in this case – external – a factor of uncertainty confirms me in using a cautious approach in monetary loosening. Until the situation as to the inflation path is also not similar in the case of certain internal aspects – I would not announce a cycle of interest rates. Whereas I could see the perspective of foot discounts in the range of 50-75 PB to the end of this year, but the subject of the Middle East and the prices of raw materials disturbed this picture a bit – said Kochalski.
– From the moment of March projection we have been observing disinfection processes and each subsequent forecast was more favorable to March. When analyzing the price processes, it was more and more clearly visible that raw materials prices were decreased. Observing the current events on the Israel-Iran axis, it is difficult to decide how this conflict ends and should be said with considerable probability that the prices of raw materials may be less favorable in the future. We see movement on oil prices. This conflict may end in the next days, but it can also last and then, as to the tendency, the path of inflation worsens – added Kochalski.
He also noted that the shape of next year's budget is some unknown.
At the last meeting in June, the MPC decided – as expected – to leave interest rates unchanged, after it reduced them in May by 50 PB, to 5.25 percent. in the case of the main reference foot.
