Inflation, interest rates in Poland. Jerzy Hausner on the weakening of the zloty

Inflation in Poland has not yet reached its peak. The weakening of the zloty means that we are importing more and more inflation – said professor Jerzy Hausner, former deputy prime minister and minister of the economy, in “Fakty po Faktach” on TVN24. In his opinion, there should be no announcement that “we will see interest rate cuts on the horizon.” The former member of the Monetary Policy Council also spoke about the fight against the build-up of “three shocks”.

On Wednesday we observe further zloty weakening. The Swiss franc costs over PLN 5 in the evening, which means it is the most expensive since January 2015. You also have to pay over PLN 4.86 for the US dollar. In turn, the euro is valued at PLN 4.78.

– This is a situation that has some external factors. What has been announced at the moment in President Putin’s address is somewhat of a threat, because many governments and states are able to imagine what further possible consequences will be. Business people estimate the risk doing businessespecially in a country near the frontline, it is higher – commented professor Jerzy Hausner, former deputy prime minister and minister of the economy in “Fakty po Faktach” on TVN24.

As he pointed out, on the other hand, “we are dealing with a situation where the policy of central banks, including the US Fed, is a policy of combating inflationlifting interest rates“. – We stopped at a certain level – noted the former member of the Monetary Policy Council, adding that he is not a supporter of” any more sharp increase in the level of interest rates in Poland “.

PAP / Maciej Zieliński

“The weakening of the zloty means that we import more and more inflation”

In his opinion, “it is more important that the communication from the National Bank of Poland, and especially the president of this bank (Adam Glapiński – ed.), Clearly says: we do not put our weapons down, if necessary, we will raise rates in a reasonable manner”. – Certainly there should be no announcements that we will see an interest rate cut on the horizon – emphasized Hausner.

– So, if we have very unreadable communication with market participants, other banks do differently, follow a conventional communication policy, then of course the money flows to these safe havens, to hard currencies.

As the former deputy prime minister explained, “the weakening of the zloty means that we import more and more inflation, and inflation outside us, in some cases when it comes to materials and raw materials, is higher than in Poland, so we import it simply by weakening the zloty”. – This is an activity that is pro-inflationary – he stressed.

– We are dealing with a situation where we have somehow fallen into a trap from which there is no good solution. If there are so many uncertainties, so many complex situations, three things are needed: competence, honest communication, and honest information, and the credibility of those responsible for conducting economic policy. The lack of these three elements makes our activities – even if they are well planned and we want to conduct them consistently – simply less effective. We simply pay a higher price for what we have to do anyway to deal with the accumulation of three shocks – said the guest of “Facts after Facts” on TVN24.

– On the one hand, it is a popandemic shock, on the other hand, we are dealing with the consequences of a war shock, but now we are dealing with an energy shock. We are not alone in feeling it, but with us it is a very serious problem – he added.

Inflation in Poland

According to Hausner, inflation in Poland has not yet reached its peak. – This does not mean that it will grow rapidly, this year it will remain at a similar level. I do not like to forecast inflation because it is very difficult, but I do not think that it will noticeably decrease this year. I am not talking about one month, because there may be deviations here, but I am talking about what will happen in the coming months – explained the former MPC member.

– As for next year, it is an open question how the government will influence the shaping energy prices and various energy carriers. If (the government – ed.) Wants to clearly compensate for these price increases, which are announced at the moment, perhaps this inflation will not rise sharply – he pointed out.

PAP / Maciej Zieliński

As the former economy minister noted, if the government maintains another so-called anti-inflation shield, “perhaps inflation will not rise significantly, otherwise it will reach 20 percent.” – Even if these shields are activated, even if the government rationes coal, influences market mechanisms and does what it is trying to do at the moment, we will at most keep inflation and the inflationary environment at a similar level. It will not decrease, but we will postpone this disinflation process to the following years, which will also have a negative impact on economic growth – said the former deputy prime minister.

As the guest of “Fakty po Faktach” pointed out, in the present situation “there are no simple solutions”. – We are in a situation where we really minimize losses, so I say that competence is very important – emphasized Jerzy Hausner.

Electricity bills go up

The former minister of economy was also asked about the situation in local governments, which inform about possible even three-digit increases in electricity spending.

– Cities will not go bankrupt for sure. Cities will have to implement very strict savings. First, these savings will mean (…), for example, no lighting at certain times, especially when it is most needed, therefore limited security, but cities will then have to switch off some public services, and certainly those that cannot be turned off will have to be more expensive, which will hit the quality of life of residents and affect their wallets, Hausner said.

In the case of enterprises – as the guest of “Facts Po Faktach” said – “we have to take into account that we will be dealing with a wave of bankruptcy”. – I cannot say how high – said the former deputy prime minister, adding that this would especially apply to small and medium-sized enterprises, “in those regions of the country, for example in the east of the country, where poverty will progress the fastest”.

As he emphasized, “there is definitely a difficult winter period ahead of us”.

Problems with the availability of coal

As Jerzy Hausner noted, “on the one hand, we are a coal power, and on the other hand, we have led to a situation where coal may be lacking in Poland this winter”.

– At the moment, coal is a scarce commodity, so one thing is at what price it can be purchased and what needs to be done, how difficult it is to obtain the opportunity to purchase coal at the moment, but on the other hand, there is a problem that it is lacking and that is the sum many negligence, including a hasty, premature decision to introduce not the embargo, but to introduce it immediately, without any transitional period – assessed the former deputy prime minister.

– Now, of course, we can see the actions of the government, but the effect of these actions is that this coal is becoming more and more expensive and its quality is getting lower, so we are dealing with another paradox, which, unfortunately, reflects very badly on the efficiency of our state, on the strategic imagination of the rulers Hausner added.

Main photo source: TVN24

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