Monday, September 06, 2004

Polish Central Bank fears further serious inflation

The Polish Central Bank has issued a very gloomy warning about continuing inflation in the country. They expect a nine per cent rise in food prices in the next three months. Prices are already rising at a worrying speed. And what has caused this sudden lurch into inflation? One would never guess – yes, indeed, it was Poland joining the European Union.

According to AFP:
“Consumer prices jumped by 4.6 percent in the year to July, nearly three times the 1.7-percent rate posted in 2003, in a sign of the inflationary pressures seen across the central and Eastern European countries that joined the EU this year.”
The Centre Left government, that has already had a number of problems since accession – like losing a prime minister – denies the accuracy of the warning. In particular, the Finance Minister, Miroslaw Gronicki, has announced that he does “not agree with this forecast, which is very pessimistic and useless for calculating [next year’s] budget”. Why it should be useless just because it is pessimistic is not clear, but that’s politicians for you.

Prices for basic foodstuffs went up soon after accession, as we have reported in the past, partly because of panic buying by consumers. Worried by inflation, the Central Bank raised its key lending rate several times, the last time in August to 6.5 per cent. The raise meant 125 basis points had been put on interest rates since June. This and other rising rates have brought about fears of appreciation in the currency, which would make Polish goods uncompetitive abroad and stymie the so far good economic growth.

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