Inflation and interest rates. A record-breaking difference
Inflation is accelerating. FROM new GUS data shows that in October 2022 the average price level of consumer goods and services was 17.9 percent. higher than in the corresponding period of the previous year.
The September copy was at the level of 17.2 percent, in August it was just over 16 percent. and so you can count on. We have been dealing with a systematic increase in inflation almost from the beginning of 2021.
The effects can be seen with the naked eye on store shelves. On the other hand, the losses caused by inflation in Poles’ savings are less visible. The same PLN 100 received a year or two ago is currently worth less in real terms, because the purchasing power of money is systematically declining.
These losses are limited to a small extent by interest rates, which are much higher than a year ago, but are very low compared to inflation. By subtracting the inflation rate (17.9%) from the main NBP rate (6.75%), a record negative real interest rate comes out, already exceeding 11 percent.
It is worth noting that, for example, in 1998 there was also double-digit inflation in Poland. Back then, however, interest rates fluctuated between 15 and 24 percent. This is why the real interest rate was positive and encouraged, for example, saving. This cooled down consumption and allowed the high prices to be brought under control over time.
The current conservative attitude of the National Bank of Poland, which does not want to cool down the economy too much and harm people who repay loans, means that inflation is still on an upward wave and money is depreciating.
Some members of the MPC noticed the problem. Prof. Joanna Tyrowicz in a recent interview for “Rzeczpospolita” stressed that now the real interest rate is practically as low as it was before the start of the hike cycle in October 2021.
The rest of the article is below the video
– About 70 percent Poles believe that prices will grow faster or as fast as today, as with inflation at 17.2 percent. means that Poles clearly do not believe that the NBP will bring inflation to its target of 2.5%. Tyrowicz pointed out.
Therefore, in her opinion, the MPC should take decisive steps. The first should be an increase by 1 percentage point. already in November, a ultimately, interest rates should be above the inflation expected by the market and consumers.
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