Are monetary and fiscal policy on track?
Monetary policy has been criticised for excessive caution, as inflation has frequently undershot its target range over the last couple of years. Inflation reports from the National Bank of Poland (reports which follow the model of the Bank of England’s reports, including the fan chart presentation of inflation forecasts) throughout 2005 tended to project inflation creeping up towards 2.5% over an 18-month period, but inflation in the year to May 2006 was still only 0.9%. But the cautious policies followed by the NBP, particularly since its adoption of an inflation targeting regime in 1998, played an essential role in eliminating inflation, which was 33% in 1994 and still 9-10% in 2000. Viewed in this light, any recent tightness of policy has probably made rather small impact on slowing growth. The OECD has nevertheless recommended that the NBP needs to ensure symmetry in its approach to inflation targeting and needs to be willing to probe the limits of the economy’s supply responsivene
