WARSAW, Oct 24 (Reuters) - Poland’s record low interest rates are artificially inflating house prices, encouraging people to get into debt and causing higher inflation, central banker Kamil Zubelewicz told Reuters.
“The source of the problems is interest rates which are too low,” said Zubelewicz, who is seen as one of the most hawkish members of Poland’s monetary policy council (MPC), which has set a record low benchmark rate of 1.5% since March 2015.
However, he sees little chance of a rate hike any time soon.
“The current balance of power in the MPC means that interest rates will remain at their current level until the end of this Council’s term,” Zubelewicz said.
Polish central bank governor Adam Glapinski has repeatedly said rates may remain on hold until the MPC’s term ends in 2022.
With inflation of 2.6% real interest rates are negative, and Zubelewicz said this means risk-averse savers who would normally put their money in the bank are encouraged to buy other low-risk assets, artificially inflating the prices of real estate and certain shares.
The impact was particularly evident in the housing market, where potential buyers see prices rising by 12% a year while their savings earn interest of only 2%.
“Monetary policy not only ceased to protect the value of Polish money, but ceased to guarantee that money put in the bank would keep its value,” he added.
Zubelewicz said Poles are taking out increasingly bigger loans, encouraged by low rates and the improved credit-worthiness resulting from their rising incomes.
Despite a slowing of price growth, with Polish inflation slowing to 2.6% in September from 2.9% in the previous two months, Zubelewicz believes it is no cause for excitement.
“The current fall in inflation to 2.6% per annum means that prices are still rising, just slightly less than before.” (Reporting by Pawel Florkiewicz and Alan Charlish; Editing by Alexander Smith)