According to Polish analysts, further interest rate hikes are possible next year

The Monetary Policy Council (MPC) raised interest rates, including the reference rate, to 0.5% from 0.1%. Economists predict that the decision on further rate hikes will rather be made next year, while there is little likelihood of tightening the monetary policy in the coming months of this year.

The MPC unexpectedly raised interest rates today, including the reference rate, to 0.5% from 0.1%. From October 7, the lombard rate will amount to 1.00% (increase by 50 bp), deposit rate - 0.00% (unchanged), rediscount rate 0.51% (increase by 40 bp) and the discount rate 0.52 % (increase by 40 bp).

The market consensus predicted that interest rates would remain unchanged (the main rate was still 0.1%).

As indicated in the statement after the meeting, in the conditions of the currently accelerating economy and favorable situation on the labor market, inflation may stay at an elevated level longer than previously expected, therefore the goal of bringing inflation down to the target of the National Bank of Poland (NBP) in the medium term was raise interest rates. NBP may still intervene in the currency market, it was noted.

The reserve requirement ratio increased from 0.5% to 2%.

Economists predict that by the end of 2022 interest rates will return to pre-pandemic levels - 1.5% for the reference rate - or even reach 2-2.5%. Analysts emphasize that the moment of the increase is surprising for the market, while the scale itself is not.

Some economists expect another 3-4 rate hikes of 25 bp.

Below are the most interesting comments from analysts:

"This is not the end, we see a large fiscal expansion in 2022 and high inflation, target rate of around 2.0% compared to 1.5% before the pandemic," chief economist at BSK ING Rafał Benecki

"Today's 'flight forward' gave a strong signal of the NBP's readiness to respond to increased inflation, it allowed the zloty to strengthen and to make up for a part of the gap to other central banks in the region. more probability of another move in November or December and we see a good chance that the MPC will want to wait until the next projection, this time in March," expert of the Macroeconomic Analysis Department of Bank Pekao Piotr Bartkiewicz

"We will wait until our forecast of the interest rate path is updated [...], but for now we stick to our view of a final rate of around 2.5%. At this stage, we believe that this level may be reached either by the end of 2022, or at the beginning of 2023," senior analyst of the currency market and bonds / Economist Citi Research / Bank Handlowy Cezary Chrapek

Source: MPC and ISBnews