MPC member: rate cuts were premature, but maybe it’s time for another one?
– Inflation is low, it does not need to be additionally suppressed by administrative actions that cost taxpayers several billion zlotys, which can be better spent today. These actions were needed when inflation was in double digits. Spring was the perfect time to withdraw from the reduced VAT rate on food, said Ludwik Kotecki, member of the Monetary Policy Council, in an interview with money.pl.
Ludwik Kotecki: rate cuts were premature
He is against lowering interest rates. In his opinion, the previous reductions were premature and may result in the Council having to increase them again in the near future to suppress unfavorable signals in the economy. He is aware that if the increase were to happen now, “market participants might think that the Council has gone crazy, for the second time, because let me remind you that the financial market and economists were completely surprised by the decisions of the Monetary Policy Council in September and October 2023.” This is an argument not to raise rates, at least until it is absolutely necessary.
Kotecki was also asked to review the announcement of the Minister of Labor Agnieszka Dziemianowicz-Bąk, who announced that this year Poland must implement the EU directive that obliges EU member states to maintain the appropriate level of minimum wage. The MPC member does not believe that the minimum wage is too low – on the contrary, the scale of further increases should be considered.
A stiff minimum wage can be a trap
– I don’t want to talk about collective layoffs, the scale of this phenomenon is exaggerated in the media. But this is perhaps the first serious signal that Poland is no longer cost-attractive for companies. Sooner or later we would lose this cost competitiveness, because we are developing relatively quickly, but we should strive for this to happen gradually, so that we have time to prepare to compete with quality, he said.
Let us recall that the EU directive indicates, among others, the criteria for the adequacy of the minimum wage: 50 percent average salary and 60 percent median salaries. Kotecki is afraid of such a stiffening of the minimum wage.
– The world is changing, we don’t know what will happen with inflation, productivity and labor demand. For this reason, if someone were to consider such an automatic linking of the minimum wage with the average or median wage, a revision or review clause should also be introduced into this rule. The idea is to check every few years what the positive, but also negative, economic effects of this solution are, he said.
