By Monika Rozlal and Dorota Bartyzel
Aug. 31 (Bloomberg) -- The Polish central bank’s new Monetary Policy Council, to be formed by mid-February, must focus on curbing inflation rather than boosting growth, said Jan Winiecki, an economic adviser to WestLB and an MPC candidate.
Winiecki may be nominated by the ruling Civic Platform party to the 10-member MPC, according to a government official and two party officials who declined to be named because the nomination process is confidential. Winiecki declined to comment on whether he has been approached. The Platform promoted him as a candidate when the current council was being formed in 2004.
The council “won’t be focused on fighting recession but on fighting inflation in conditions of slow growth,” Winiecki said in an interview in Warsaw on Aug. 27. “The challenge” will be “balancing between the Scylla of accelerating inflation and the Charybdis of throttling a fragile recovery.”
The current policy makers this week left the benchmark interest rate unchanged for a second month, after lowering it 2.5 percentage points to a record low since November, on signs of economic recovery and a pick-up in inflation. They maintained an “easing” policy stance, though, anticipating a worsening labor market will squeeze consumption and contain price growth.
Winiecki is pessimistic about cost pressures, expecting commodity and oil prices to rise for “five or seven years” and anticipating demands for higher wages, which “eased momentarily this year, but it’s only a matter of time before they start boosting inflation.”
He also doesn’t believe the rising jobless rate will hurt consumer demand.
‘A Mistake’
“It’s a methodological mistake to assume a higher unemployment rate necessarily affects consumption,” said Winiecki. “As soon as economic growth accelerates, employment declines will reverse and that’s what matters in terms of consumption.”
Winiecki forecasts economic growth at about 1.5 percent this year, compared with the government’s prediction of 0.2 percent. Gross domestic product rose a better-than-expected 1.1 percent in the second quarter, the statistics office said on Aug. 28.
Winiecki also said growth may accelerate next year above the government’s projection of 0.5 percent. That should help narrow the 2009 budget deficit to less than the planned 27.2 billion ($9.42 billion) and further trim it in 2010, he said.
The expansion will be driven by rebounding industrial output, which he expects to start rising in September, increased domestic demand and exports.
‘Sufficiently Cautious’
“Monetary policy, as currently practiced, is sensible and sufficiently cautious to ward off future problems with inflation,” he said. “Further rate cuts aren’t on the table as the economy is recovering and cost pressures will start rising.”
The MPC will end its term early next year. The president and the two chambers of parliament can each recommend three members to the 10-seat body. Bank Governor Slawomir Skrzypek, who took office in January, 2007, is the 10th member, with the power to break potential ties.
Other potential candidates include Zyta Gilowska, former finance minister, described by an aide to President Lech Kaczynski as an ideal candidate. Junior coalition partner the Polish Peasants’ Party says it will recommend current Deputy Finance Minister Elzbieta Chojna-Duch, former chief executive officer of Bank Ochrony Srodowiska SAJozef Koziol and Wladyslaw Szymanski, an academic.
Jaroslaw Kaczynski, head of the main opposition party Law & Justice, has said the president may also want to nominate historian Wojciech Roszkowski.
To contact the reporter on this story: Monika Rozlal in Warsaw at mrozlal@bloomberg.netDorota Bartyzel in Warsaw at dbartyzel@bloomberg.net
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