Fulfillment of the Inflation Target in Poland

Abstract

Inflation is a fundamental category within an economy. Mainstream economists claim that its rate cannot be high nor too low, because it harms the economy. This is why today the basic aim of central banks is the maintenance of the increase of consumer prices on a low level.

The main aim of the study is an evaluation of the level of fulfillment of National Bank of Poland’s inflation target that is fixed on the level of 2,5% annually with the accepted range of +/- 1 percentage point deviation. Main causes that were shaping the rate of real inflation were also specified.

Research methods adopted in this paper are the deduction and the analysis of statistical indicators.

 In the period 2008-2011 the annual inflation in Poland was close to the inflation target only in 2010. In other years it was formed on the level around the higher border of the deviation range or above it. Main factors that influenced the increase of prices were: (1) changes in global demand – they were strongly influencing the inflation rate after 4 quarters and the most important category of global demand was consumption; (2) changes in wages – the increase of nominal wages was influencing the increase of prices mostly in the same quarter. After taking into account the changes of work efficiency, inflation reacted mainly after 4 quarters; (3) changes of prices of raw materials on world markets; (4) changes in the exchange rate of the zloty against the euro and the dollar. Their influence on consumer prices was also delayed.