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Poland Raises Rates On Inflation Fears

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FT link

Poland’s central bank raised its benchmark interest rate by a quarter point to 3.75 per cent, the first rate increase since mid-2008, a sign of the bank’s concern over recent increases in inflation.

Analysts expect the tightening cycle to continue for much of 2011.

“We expect interest rates will increase this year by 50 basis points,” said Maja Goettig, chief economist for Poland’s BPH bank, in a research note.

The inflation rate in December was an annual 3.1 per cent, the highest in 11 months, a sign of the economy’s strength. Poland was the only European Union country to avoid recession in 2009, thanks in part to the central bank cutting rates from 6 to 3.5 per cent, and growth for the year is likely to come in at about 3.7 per cent.

Polish exports have soared on the back of Germany’s economic revival, and there is concern about future inflationary pressures when Germany opens its labour market to new EU members, siphoning off thousands of Polish workers. Imports have also jumped on the strength of growing domestic demand, leading to a widening current account deficit.

In addition, the zloty softened against the euro and the dollar late last year, reducing its ability to slow inflation growth, although the currency has slightly rebounded in recent weeks. In interviews given before the rate decision, Mr Belka said the bank also wanted to act to strengthen the zloty.

The zloty rose against both the euro and dollar immediately after the decision.

The Polish decision is part of a wider regional trend as central Europe's economies rebound from the crisis. Hungary has already twice raised its rates and the Czech central bank is widely expected to do the same.

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National Bank of Poland

Narodowy Bank Polski

About the NBP

Monetary policy

The basic objective of monetary policy is maintaining price stability. Stable prices are an indispensable element of constructing solid foundations for long-term economic growth.

Since 1999 the direct inflation target strategy has been utilised in the implementation of monetary policy. Within the framework of this strategy, the Monetary Policy Council defines the inflation target and then adjusts the NBP basic interest rates in order to maximise the probability of achieving the target. Since the beginning of 2004, the National Bank of Poland has pursued a continuous inflation target at the level of 2.5% with a permissible fluctuation band of +/- 1 percentage point. The NBP maintains interest rates at a level consistent with the adopted inflation target by influencing the level of nominal short-term interest rates on the money market. Money market rates affect loan and deposit rates at commercial banks and thus the size of loans, the demand within the economy and the inflation rate. The set of monetary policy instruments used by the NBP enables it to determine interest rates on the market.

These instruments include open market operations, reserve requirements and credit-deposit operations.

....

....

Apart from a couple of shortish periods Poland seems to have kept within its upside target range since 2004 and kept it's average inflation rate at not much above its central target and averaging well under the 3.5% upper limit since 2004.

A far better performance than that of the the BoE's Manana Policy Committee over the same period of time.

Edited by billybong

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That's funny, just to summurise. Their target is 2.5% ours is 2% there rate of inflation is 3.1% ours is 3.7%, their interest rates were at 3.5% and they put then up to 3.75%. Ours are at 0.5% and they won't move them! !

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That's funny, just to summurise. Their target is 2.5% ours is 2% there rate of inflation is 3.1% ours is 3.7%, their interest rates were at 3.5% and they put then up to 3.75%. Ours are at 0.5% and they won't move them! !

That's because the backward Poles don't understand the new economic paradigm and the fact our inflation is down to "one off events" that keep repeating each year.

Therefore Poles backward on economic thinking, Mystic Merv ahead of the curve.

Plus we have a banking system to support which has been involved in very complex trades which our the backward Polish banks have avoided as they don't understand how CDO's etc... work, whereas UK banks are highly intelligent and forward thinking have created a highly complex modern banking system which requires 0.5% rates or the entire scheme collapses.

UK forward thinking and progressive and requires 0.5% interest rates.

Poland backward financial system which works on higher interest rates.

See the difference? :lol:

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That's because the backward Poles don't understand the new economic paradigm and the fact our inflation is down to "one off events" that keep repeating each year.

Therefore Poles backward on economic thinking, Mystic Merv ahead of the curve.

Anyone remembers that meeting between Brown and Tusk?

brown_tusk_poland_1392778c.jpg

Gordon Brown receives a lecture from Polish Prime Minister (telegraph link)

In a joint press conference following talks between Mr Brown and Donald Tusk, the Polish prime minister, the two men were asked for their contrasting approaches to the economic downturn.

Unlike the UK, the eastern European state has yet to enter into a recession and has experienced 12 consecutive years of growth.

Asked how his government had managed to avoid the mistakes made by the British, Mr Tusk said that it was not his role to comment on other nations' economies - and then proceeded to do just that.

He said: "The Polish government at a time of financial crisis has behaved with full responsibility in terms of its public finances and the budget deficit.

"After a few months, our government made the assumption that the method to deal with the financial crisis was not to increase expenditure but (to ensure) the availability of public finances."

He added that Poland's success was down to "efficient supervision of banks and sticking to the rules."

With Mr Brown beside him, Mr Tusk went on to say that his administration's approach was based on "not exaggerating with living on credit. These are the most certain ways of avoiding ... financial crisis."

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Anyone know what Poland's wage inflation is running at, or is it low like the UK. If we are going to compare you need apples & apples.

Don't spoil their fun!

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Anyone know what Poland's wage inflation is running at, or is it low like the UK. If we are going to compare you need apples & apples.

It seems that real wage growth was about 1% in Poland last year.

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Anyone know what Poland's wage inflation is running at, or is it low like the UK. If we are going to compare you need apples & apples.

Apparently in the year to November 2010 it was 3.6% although (apparently) it was quite a lot higher a few years before.

Edited by billybong

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That's funny, just to summurise. Their target is 2.5% ours is 2% there rate of inflation is 3.1% ours is 3.7%, their interest rates were at 3.5% and they put then up to 3.75%. Ours are at 0.5% and they won't move them! !

It is simple. Polish banks offered only 80% LTV mortgages, so Poles turned to Swiss banks ....

Pure Swiss .... :)))

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lol

1% or 3.6% :unsure:

Inflation was 3.1%. 3.6% nominal - 3.1% inflation = 0.5% real.

The nominal increase that I saw was a bit higher. All told, a small positive real change in wages in Poland last year.

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Inflation was 3.1%. 3.6% nominal - 3.1% inflation = 0.5% real.

The nominal increase that I saw was a bit higher. All told, a small positive real change in wages in Poland last year.

The Zloty is a better store of value than turdling - end of story

Those with STR funds had better move them into better stores of value

I bet the Pole keeps most of his savings in Zloty

Just how much as the zLOTY APPRECIATED AGAINST THE £ IN THE LAST 5 YEARS!

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Inflation was 3.1%. 3.6% nominal - 3.1% inflation = 0.5% real.

The nominal increase that I saw was a bit higher. All told, a small positive real change in wages in Poland last year.

Inflation in Poland was 2.7% to November 2010 the same date as the actual 3.6% increase in wages I quoted - according to the figures I've seen. So a 0.9% real increase after inflation which is close to "about 1% - real" but hey I was only offering one possible explanation to the question about the difference in the figures.

Poland are still meeting their inflation targets far better than the UK whatever the percentage wage increases.

Edited by billybong

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Ok different to us then.

Possibly but Poland are still meeting their inflation targets far better than the UK whatever the percentage wage increases.

Edited by billybong

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Who cares about wages? Wages is just the BofE's excuse for not raising rates. If inflation keeps up like this, wages will soon follow, or if they remain low, then, ouch, the over indebted will be struggling with the higher cost of living instead.

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Who cares about wages? Wages is just the BofE's excuse for not raising rates. If inflation keeps up like this, wages will soon follow, or if they remain low, then, ouch, the over indebted will be struggling with the higher cost of living instead.

I can guarantee that if wages for the great unwashed were rising rapidly, suddenly the BoE would become super vigilant and hike interest rates. Whilst its only banker bonuses, looters wages and FTSE CEO's vigilance is at snooze levels.

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> He added that Poland's success was down to "efficient supervision of banks and sticking to the rules.

Ha-ha... In 2007, 80% of Polish residential mortgages were non-Zloty. On top of that, there was 120% LTV mortgages and 50+ year amortizations. Where was the supervision as the banks were saddling gullible home buyers with risk? After doubling my money between 2004 and 2007 on a small strip of land out in the middle of nowhere an hour from Warsaw, I knew that was a crazy bubble. I'm just amazed an Irish style collapse hasn't happened in Poland yet.

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That's funny, just to summurise. Their target is 2.5% ours is 2% there rate of inflation is 3.1% ours is 3.7%, their interest rates were at 3.5% and they put then up to 3.75%. Ours are at 0.5% and they won't move them! !

And the savings rate is 5% (going up to 5.5% now), so you get a real return on savings in Polish banks as well as a expected/predicted rising zloty against the Euro/USD/GBP.

The Finance minister is British of Polish descent and a lecturer at London School of Economics and I understand why he was voted FM of the year by European ministers, he really knows his stuff and talks sense.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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