Recent CSO data show deflation in February was 0.8% Under the sign of deflation all past year and second half year 2014. „The probability of Poland falling into deflationary trap is still small" - said NBP experts.
„In the deflationary trap, conventional monetary policy is not effective, but the economy can still be stimulated by fiscal policy"
Deflation in February was 0.8% on an annual basis, compared to January this year. 0.1% - stated the Central Statistical Office. In relation to the previous year the transport - o 7.3% O 4.5% cheaper were clothes and shoes
Deflation is a long-term fall in the average price level in the economy, which translates into an increase in the purchasing power of money. Under deflation conditions for the same amount of money after some time you can buy more goods and services. Under the sign of deflation all past year and second half year 2014.
According to GUS analysts, the main impact on deflation in February was the lower transport prices (about 1.9%) and clothing and footwear (about 1.8%). As they calculated, they decreased the rate accordingly. 0.16 p. percent and 0.1 p. percent higher food prices (by 0.4%) and increases and higher prices of recreation and culture (a 0.5%) This indicator was increased by 0.09 p. percent and 0.03 p. percent
The fall of the average price level carries the risk that the Polish economy may be another victim of the so-called deflationary trap.
„The deflation trap is a situation in which the Central Bank loses its ability to further stimulate economic prosperity with its standard tools, such as short-term interest rates, because these rates have reached their lower usual zero limits" - explained Marcin Kolasa from the NBP Economic Institute.
NBP experts conducted a study to assess the probability and consequences of falling into a deflation trap. It follows that to 2012 „Poland's falling into deflationary trap was practically impracticable".
The situation changed at first 2013 When the probability increased in the area 1%, another increase was observed at the end 2014, When this level reached several percent. "It can still be said that this probability is still low" - said NBP experts.
In a deflationary trap, the effects on GDP are much worse, GDP is falling much more than when the economy is not in a deflationary trap.
„In the deflationary trap, conventional monetary policy is not effective, but the economy can still be stimulated by fiscal policy" - emphasised researchers. Studies show that the effectiveness of fiscal policy when the economy is trapped in deflation is clearly higher than in normal times.
Source: Kurier PAP - www.kurier.pap.pl