Divergent Views on Inflation: Experts Weigh In on Monetary Policy

In a recent development, Poland’s Deputy Minister of Finance, Artur Soboń, and economist Marek Zuber have offered contrasting forecasts and opinions on the country’s inflation trajectory and the role of monetary policy in managing it.

Deputy Minister Soboń, on the one hand, has expressed optimism about the future of inflation in Poland. He believes there is a chance that consumer inflation could dip below 7% year-on-year in the coming months of the year. This statement comes after a two-day Monetary Policy Council (MPC) meeting that resulted in a 25 basis point reduction in interest rates, bringing the reference rate to 5.75%.

Soboń pointed to recent data from the Central Statistical Office, which showed consumer inflation at 8.2% year-on-year in September 2023, down from 10.1% in August. He contends that the MPC’s decision to reduce interest rates is in line with market expectations and suggests that the rapid decline in inflation from 18.4% in February to 8.2% in September is a positive sign.

However, economist Marek Zuber holds a more cautious view. He warns that cutting interest rates too quickly might perpetuate inflation at a high level, possibly between 5% and 8%, for the next two to three years. Zuber stresses the importance of raising rates to combat this risk.

Zuber’s concerns are rooted in the belief that inflation is a complex issue to address once it gains momentum. He acknowledges that while the current inflation rate is lower than in 2022, it still exceeds the National Bank of Poland’s assumptions. He emphasizes the difficulty of reducing inflation from 6.5% to 2% compared to bringing it down from 18% to 6.5%. Zuber points to the United States, where despite similar interest rates, inflation remains lower. He cites Federal Reserve Chairman Jerome Powell’s statement that inflation in the U.S. may continue to rise, highlighting a contrasting policy approach.

In conclusion, Poland’s economic landscape is marked by differing opinions regarding the best course of action to manage inflation. Deputy Minister Soboń sees hope in a potential decline in inflation, while economist Marek Zuber warns against hasty interest rate cuts that could exacerbate the issue. The MPC’s recent decision to lower rates indicates a willingness to address inflation, but the debate continues on the most effective path forward for the country’s economy.

Implications for Banking and Business

Developments in the Polish banking sector affect businesses operating in the country in several ways. Access to corporate banking services, credit availability, deposit rates, and payment infrastructure are all critical factors for companies — whether established Polish firms or foreign-owned entities entering the market.

For foreign entrepreneurs setting up operations in Poland, choosing the right banking partner is a strategic decision. Major Polish banks including mBank, ING Bank Śląski, Bank Millennium, PKO BP, and Santander Poland offer varying levels of service for international clients, including English-language online banking, multicurrency accounts, and dedicated relationship managers for corporate clients.

The Polish banking market is well-regulated by the KNF (Financial Supervision Authority) and participates in the EU deposit guarantee scheme (BFG — Bank Guarantee Fund), providing deposit protection up to EUR 100,000 per depositor per institution. This regulatory framework provides stability and confidence for businesses maintaining corporate funds in Polish banks.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our corporate tax advisory, or contact us for a free consultation.