Central bank says it’s not responsible for high prices

MAG
opublikowano: 22-07-2008, 10:47

Warsaw (Puls Biznesu) – The government and the central bank are each looking for the one to be blamed for growing inflation.

The second round of clash on the reasons of high inflation between the National Bank of Poland (NBP) and the government has started. This week, a debate on the same topic will be held in the parliament. Today, the Citizens’ Platform club organizes a seminary trying to prove that it’s the central bank to be blamed for high prices. Yesterday, NBP representatives were saying something different at their conference.

“Inflation in Poland is moderate. Prices grow slower than in, among others, Belgium or the USA, and not much faster than in Finland. NBP has reacted to growing inflationary risk by raising interest rates. Last year, the increases were among the highest in the whole region”, Zbigniew Hockuba, member of NBP management said.

Jerzy Osiatynski, the economist of the Polish Academy of Science (PAN) defends the central bank as well.

“About 75-80 percent of inflation is generated by outside factors influencing the food and energy prices worldwide. This is the main reason of high prices in Poland. NBP actions have a smaller influence on the present price level. You cannot exaggerate with accusations against the central bank”, Jerzy Osiatynski added.

There are, however, economists, with totally different view.

“The present situation of the labor market first of all arouses fears that inflation may be much higher in 2-3 years. Wages are growing 10-12 percent year-on-year which will strongly stimulate price increases in the near future. I lack such reflections in the documents of the Monetary Policy Council”, Stanislaw Gomulka, London School of Economics professor and Business Centre Club chief economist said.

“In the present situation, it is the central bank’s role not to allow for the so called second-round effects: when inflation in wage negotiations is an argument for raises, and these raises additionally support inflationary processes”, Witold Orlowski explained.

All economists, agree, however, that the government is also responsible for inflation.

“Inflation will be a smaller risk if the labor market is reformed. Reform of the pension system, shifting the retirement wage of women and opening borders to employees from the East would limit wage demands. Thanks to reforms, the monetary policy of the central bank could be milder”, Stanislaw Gomulka said.

“The monetary policy, without cooperation from the government, is not enough to cope with inflation”, PAN economist warned.

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