Interest rates

Monetary Board raises interest rates – The First News

Rafal Guz/PAP

The Monetary Policy Board (RPP), the rate-setting arm of Poland’s central bank, raised the benchmark interest rate on Thursday by 50 basis points (bp) to 6.50%.

The National Bank of Poland’s Lombard rate was also raised from 6.50% to 7.00%, the rediscount rate from 6.05% to 6.55% and the discount rate from 6.10% to 6.60%.

At the same time, the RPP also increased the deposit rate from 5.50% to 6.00%.

The latest hike is the tenth in a row and is seen by economists as a reaction to rising inflation and a weaker national currency.

Meanwhile, prices of consumer goods and services (consumer price index, CPI) rose 15.6% year-on-year and 1.5% month-on-month in June 2022, according to the Central Statistics Office. (GUS).

According to the Polish Economic Institute (PIE), a government think tank, the cycle of rising interest rates should be coming to an end.

Inflation in the coming months will remain high and the global economy is increasingly at risk of a deep recession. Under such conditions, further interest rate hikes are unlikely,” experts said. PIE.

“The NBP (National Bank of Poland – PAP) did not declare any further moves, but due to deteriorating economic data, further increases are questionable,” they added.

“In Europe, Germany is most at risk – Bundesbank estimates indicate that the gas crisis means a decline in German GDP of up to 8.5% in the first quarter of 2023,” the PIE commentary reads. “Such a big collapse means problems for Polish exporters and industry. That’s why the PMI index fell to 44.4 points in June. Similar values ​​were present only during the pandemic period,” writes the PIE.

In the opinion of the institute’s experts, under such conditions, further rate hikes could considerably aggravate the extent of the economic slowdown in Poland.

“Despite the drop in activity, inflation will be high. Although crude oil and agricultural commodity prices have fallen in recent days, Europe will still be grappling with rising energy costs” , predict analysts. “We are seeing both gas and coal price increases. Under such conditions, next year will bring a significant increase in tariffs,” they added.