Can the monetary policy conducted by the central bank be more politicized than economically substantive?

Dariusz Prokopowicz @Dariusz-Prokopowicz

01 January 1970 2 4K Report

Will a monetary policy conducted in this way, in which economic factors are less important than political factors, not soon cause mistakes to be made again when conducting this policy and lead to another crisis in the economy?

7.9.2023 the central bank in Poland, i.e. the National Bank of Poland, despite the fact that still, despite the end of the Covid-19 pandemic more than a year ago, large amounts of additional money are being injected extra-budgetarily into the economy as part of the pre-election government social programs, inflation is still over 10 percent, average wage growth is over 10 percent, the rate of economic growth shows no signs of economic recession, the debt level of the state's public finance system is growing rapidly, oproc. of bank deposits is at a low level that does not even compensate for the level of loss of purchasing power of money, the cost of servicing the public debt is growing rapidly, the national currency is weakening reduced interest rates. by 0.75 percent. Most financial analysts, even taking into account political factors in addition to economic factors, were forecasting a reduction of these interest rates by 0.25 percent, not by 0.75 percent. Besides, this was also based on what the president of the National Bank of Poland said and declared at previous press conferences. Financial analysts economists have already become accustomed to the fact that the declarations made at press conferences by the president of this central bank are determined mainly by political factors, often diverge from the facts, contain inconsistencies with objectively conducted analyses of the macroeconomic state of the economy, and so on. The key issue is that the next parliamentary elections in Poland are scheduled for 15.10.2023. The monetary policy pursued by the central bank in Poland in recent years clearly confirms the thesis of strong informal ties between this policy and the government's economic policy. The covid and postcovid monetary policy pursued since 2020 first contributed to inflation from 2021 due to the strong easing of this policy, and then when it was tightened from October 2021 it acted mainly anti-conjunctural instead of anti-inflationary. The anti-conjunctural effect of the previously tightened monetary policy in Poland was mainly due to the fact that commercial banks operating in Poland for many years have been granting long-term mortgages and business loans at variable interest rates for more than 95 percent of the time. This is a kind of evanescence of banking in Poland compared to other developed countries. Oddly, the forecasting analyses developed at the central bank before the earlier monetary tightening apparently did not fully take into account this important economic factor. This is yet another point supporting the thesis that a highly politicized monetary policy is being pursued in Poland. This then raises the following question: won't a monetary policy conducted in this way, in which economic factors are less important than political factors, soon cause mistakes to be made again when conducting this policy and lead to another crisis in the economy? I, on the subject of monetary policy and its role in the issue of systemic credit risk management and in the context of the emergence of the global financial crisis of 2007-2009, conducted research, the results of which I have published in several scientific articles. These articles are available on my Research Gate portal profile. I invite you to join me in scientific cooperation.

In view of the above, I address the following question to the esteemed community of scientists and researchers:

Won't the monetary policy conducted in this way, in which economic factors are less important than political factors, soon cause mistakes to be made again while conducting this policy and lead to another crisis in the economy?