Polish Election Is One More Reason for Central Bank to Shun Hike
Polish Election Is One More Reason for Central Bank to Shun Hike
(Bloomberg) -- Inflation may have ticked up more than anywhere else in the European Union this year, but for one Polish central banker the biggest risk to monetary policy stems from elections this fall.
Grazyna Ancyparowicz, the only woman on the 10-member Monetary Policy Council, opposes a first interest-rate increase since 2012, saying concern over prices is overblown. Upheaval from the parliamentary ballot, however, could curb unprecedented welfare spending or dent economic expansion in other ways.
“The post-election political context will be crucial for economic growth in the coming years,” Ancyparowicz said in an interview. “I wouldn’t worry about price increases then since inflation is unlikely to accelerate much amid a possible economic slowdown. That explains my ‘no’ to any talk about a rate hike.”
Eastern Europe is grappling with quickening inflation just as the world’s major economies weaken and shift toward monetary easing. The European Central Bank could announce stimulus measures as early as Thursday.
Poland has been enjoying growth of about 5% for three years, driven by record-low borrowing costs and unemployment alongside surging wages and unprecedented government handouts.
Ancyparowicz frets about the ruling party’s ability to meet its social commitments once growth passes its peak and consumers start to feel the pinch. On the other hand, the opposition -- in case it beats the Law & Justice party in polls slated for October or November -- may reduce welfare payouts, which could also hamper economic expansion. Opinion surveys show the ruling party firmly ahead.
“That engine may no longer work full steam as political stimuli fade away after elections, while the world economy is losing its momentum,” Ancyparowicz said. “We’ve implemented very ambitious social plans and any disruption in this regard raises threats for GDP growth.”
June’s economic readings disappointed across the board. Industrial output saw its deepest slump since 2016 and retail-sales growth was the slowest in almost a year.
“We’re on a downhill path,” said Monika Kurtek, chief economist at Bank Pocztowy SA.
Speculation over a rate hike will persist, with inflation topping the 2.5% target and threatening to stay at the 3.5% upper limit of the central bank’s tolerance range for a prolonged period. MPC members Kamil Zubelewicz, Lukasz Hardt and Eugeniusz Gatnar last week raised the possibility of a motion to lift the benchmark in 2019.
But the recent economic data and Ancyparowicz’s view that inflation won’t settle at 3.5% or above suggest talk of an increase is unlikely to progress beyond the MPC’s usual hawkish minority.
To contact the reporter on this story: Dorota Bartyzel in Warsaw at dbartyzel@bloomberg.net
To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Andrew Langley, Wojciech Moskwa
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