WARSAW, (Reuters) – Poland’s November inflation projection could be crucial to the central bank’s decision on whether or not interest rates will rise this year. Eryk Lon (one of the most dovish member of the Monetary Policy Council, (MPC), stated that.

Unexpectedly, the bank increased its benchmark interest rate by 40 basis points in October to 0.5%. It did this sooner than anticipated to contain inflation.

It will all depend on November’s projection as to whether or not there will be another rate hike in this year. Lon responded to Reuters questions by stating, “I believe the October interest rates hike will gradually reduce inflation.”

The September Polish inflation rate rose to 5.9%, which is well over the 2.5% target.

Lon said that it was possible that Lon’s November projection might indicate that the time period in which inflation remains above the limit for deviations of the inflation target is longer than the July projection.

“This is what leads me to conclude that the October rate increase was correct,” he said.

Lon indicated that it was possible for inflationary trends to begin to recede at the beginning of next and turn of next years. The prices of raw materials and oil will play a major role in this.

I believe we are able to tolerate temporary increases in inflation provided it’s accompanied with a positive situation on the labor market. “It would be even worse if inflation was low but unemployment rates were high.” The MPC member explained.

Lon stated that the principal interest rate would return to 1.5% in the coming years.

He stated that it would be worthwhile to consider expanding the range of permissible deviations from inflation targets from 1.5-3.5% down to 0.5-4.5% in the future.

“Officially, that decision in this respect will be upto the MPC in their next term of office,” said he.