Should Polish monetary policy go long?

Łukasz Hardt

doi:10.26354/bb.2.2.79.2020

Published : 2020-07-09

Vol. 79 No. 2 (2020)

Should Polish monetary policy go long?

Łukasz Hardt

https://orcid.org/0000-0001-6542-5833

DOI: https://doi.org/10.26354/bb.2.2.79.2020

Abstract

This essay discusses the optimal shape of monetary policy in Poland as the Polish economy faces the COVID-19 pandemic. It starts by discussing possible scenarios for GDP and inflation dynamics in 2020, and next it focuses on monetary policy. It reviews recent moves as taken by the Monetary Policy Council in March and April 2020, and then analyses the possibility of monetary policy in Poland going long by allowing interest rates on long-term repo operations to be lower than the reference rate. In doing so it uses, among others, the idea of reversal interest rate. Although this paper generally supports the idea of Polish monetary policy going long, it also underlines some potential risks of implementing non-standard instruments of monetary policy.