July 20, 2020 / 8:28 AM / 24 days ago

Polish central banker Hardt warns of higher inflation

WARSAW (Reuters) - Poland’s inflation may exceed the central bank’s latest forecasts, which could prompt its rate-setting panel to consider an interest rate hike, central banker Lukasz Hardt said in an interview published on Monday.

The central bank, which has cut rates three times to almost zero this year and launched large-scale bond purchases to help the economy overcome the coronavirus crisis, said in its inflation projection last week that it expected CPI to fall to 1.5% in 2021 from 3.3% seen this year.

“I have doubts over the forecast inflation path. In my opinion there is a risk that inflation will be higher,” Hardt said in an interview with the Parkiet daily.

Asked whether the central bank should increase its benchmark rate from the current 0.1%, Hardt said that was worth considering, especially when inflation remains high.

“Then, the reference rate could rise, but at the same time the rediscount rate could remain unchanged and we could potentially launch a Polish TLTRO (targeted-longer term refinancing operations) at a rate lower than the reference one,” said Hardt, one of the few hawks on the rate-setting panel.

Inflation in June was 3.3%, above forecasts, driven by “core” prices - excluding the food and energy sectors - which accelerated after the easing of the coronavirus lockdown.

Hardt also said the central bank could launch a bigger bond-purchasing plan if the benchmark rate was higher.

Reporting by Agnieszka Barteczko; Editing by Mark Heinrich

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