Inflation Angst Goes Mainstream as Polish Prices Surge Nearly 5%
Poland’s surging inflation is starting to grab the public’s attention in a worrying development for the central bank.
The day after a report showed consumer prices rose 4.8% in May -- the fastest pace in a decade -- the news received front-page treatment by leading newspapers. Mainstream financial daily Rzeczpospolita led with “We’ll Pay for Growth with Inflation” while opposition-friendly Gazeta Wyborcza asked “Why So Expensive?”
Speaking on public radio on Wednesday, government spokesman Piotr Muller was asked an unusually pointed economic question: why the central bank wasn’t doing more to protect Polish savings. He sought to reassure listeners, saying that while elevated, inflation remains under control and that wages were still growing faster than prices.
“Of course, the National Bank of Poland can take some anti-inflation measures” but low borrowing costs in times of crisis are seen as “beneficial,” Muller said. “What is important is that inflation remains a short-term phenomenon when it appears.”
Privately, policy makers are increasingly worried that a 5% rate would fuel public perception that prices will continue to march higher, entrenching higher inflation expectations, people familiar with the thinking of central bank and government officials told Bloomberg.
The east European country doesn’t have a long history of low price growth, and it’s not clear how anchored inflation expectations really are. Around 1990, the country went through hyperinflation as prices were freed following the collapse of communism. Consumer prices still rose 10% as recently as 20 years ago.
The inflation focus comes before a Monetary Policy Council meeting next Wednesday. Central bank Governor Adam Glapinski has for months dismissed higher price growth as temporary and pledged to keep interest rates at near zero until early 2022, while several other policy makers argued for a symbolic hike to signal that the central bank is on guard to quash inflation.
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