previous opinions


W Good industrial production and construction dynamics data have once again altered the balance of risk, this time increasing the likelihood of a light accelerated growth variant and a reduction in the risk of its weakening. However, these figures remain obviously influenced by one-off factors, not only related to the amount of working days in December but also the observed weakening of the złoty in terms of the euro. Therefore, I see employment data as more reliable, indicating as they do a very modest rising trend. So I still see the most probable rise in GNP in 2015 as from 2.5% to 3%, which is why I do not envisage an emergence from deflation before the second half of 2015 (and this is far from certain), nor a return to the inflation target in the whole of 2015.

Such GNP growth and inflation perspectives still create a clear margin for interest rate cuts. On the other hand, the rapid strengthening of the Franc has increased market nervousness, which does not favour large one-off changes. However, there is no reason to put off rate cuts since the relation between the Złoty and the Euro is more important than that to the Franc for the Polish economy. The recent ECB move and the strengthening of the Złoty in reaction to it indicate we also cannot afford a wait and see policy. This is why currently I am in favour of a series of incremental base- rate cuts of 25% per month.

However, the likelihood of a base scenario [MP1] is not significantly higher than that of alternative scenarios - that of stable or somewhat accelerated growth. Of course, if very good production results were repeated in subsequent months, then even the rapid growth scenario, which at the moment seems to have a probability of almost 0%, should be taken into consideration.

Monetary policy should take a distinctly different course if this were to take place. Even if inflation significantly strays below the target, rapid economic growth combined with a speedy expansion of lending could be an argument for resigning from base rate cuts and even for their increase. In this kind of situation, the Monetary Policy Council should above all observe the lending dynamic and asset and property prices. A speculative bubble resulting from an over-rapid rise in money supply may form even over a number of years. However, the longer the market fails to react to an excessive rise in money supply, the more violent market reaction can be expected in the future. Even now, the nominal, and all the more the real, dynamic of lending is relatively high, and ECB policy has increased the possibility of portfolio capital inflow to Poland.

Summing up, the Monetary Policy Council ought to, in my assessment, now have the courage to act despite the extraordinary circumstances arising from the decisions of the Swiss Central Bank and the ECB. If however the eventual good news turns out, in the final reckoning, to be the beginning of much more serious trouble, the Council must also be ready for a radical change in policy.