Poland's MPC has to keep rates slightly higher due to loose fiscal policy, says c. bank dep. governor

"This is a loose fiscal policy. The budget deficit is high (...) and there are no particular signs of tightening of this policy. What I'm pointing out and what we're looking at is the demand gap - let's look at whether the demand in the economy is demand that stimulates or moderates inflationary processes," Kightley said.

"With such a high budget deficit, that's a concern from the MPC's perspective, because it means that those rates need to be a little bit higher so that the policy mix causes no increases in inflation," she added.

Poland's central bank deputy governor stressed that there is a number of factors leading to caution in monetary policy.

"(...) The Council is saying that these decisions depend on the data (...) and to what extent the readings we are going to be faced with will confirm the projection," she pointed out.

Poland's central bank NBP believes that wage growth will decelerate due to some easing of the tight situation on the labour market.

"We are seeing a hoarding of labour, i.e. employers are rather trying to reduce working hours or somehow retain these employees, because they already have the experience that hiring new employees can be a problem, i.e. they may have trouble finding the right people," Kightley said.

"(...) The tight labour market is loosening up a bit, which means that there will be less pressure on wages," she added.

The deputy governor emphasised that Poland's central bank conducts a quarterly survey of a fairly large group of companies.

"It comes out that because the situation of enterprises is not as good as it was before, we don't have a high increase in the minimum wage or public sector wages this year - when you add it all up, you get a forecast that wages will slow down," she assessed.

tus/ ao/