Rafał Guz/PAP
The Monetary Policy Council (RPP), the Polish central bank’s rate-setting body, increased the reference interest rate by 50 basis points (bps) to 6.50 percent on Thursday.
The National Bank of Poland’s lombard rate was also raised from 6.50 percent to 7.00 percent, the rediscount rate from 6.05 percent to 6.55 percent, and the discount rate from 6.10 percent to 6.60 percent.
At the same time, the RPP also increased the deposit rate from 5.50 percent to 6.00 percent.
The latest hike is the tenth in a row, and is seen by economists as a reaction to rising inflation and the weakening national currency.
Meanwhile, the prices of consumer goods and services (Consumer Price Index, CPI) increased by 15.6 percent year on year and by 1.5 percent month on month in June 2022, according to the Central Statistical Office (GUS).
According to the Polish Economic Institute (PIE), a government think-tank, the interest rate hiking cycle is likely to come to an end.
“Inflation in the coming months will remain high, and the global economy is increasingly threatened by a deep recession. In such conditions, further interest rate increases are unlikely,” PIE experts said.
“The NBP (National Bank of Poland – PAP) did not declare any further moves, but due to the deteriorating economic data, further increases are questionable,” they added.
“In Europe, Germany is the most at risk – the Bundesbank’s estimates indicate that the gas crisis means a decline in German GDP by as much as 8.5 percent in the first quarter of 2023,” the PIE comment read. “Such a large collapse means problems for Polish exporters and industry. That is why the PMI index fell to 44.4 points in June. Similar values were present only during the pandemic period,” PIE wrote.
In the opinion of the institute’s experts, in such conditions, further rates increases may significantly deepen the scale of the economic slowdown in Poland.
“Despite the decline in activity, inflation will be high. Although the prices of crude oil and agricultural commodities have fallen in recent days, Europe will still struggle with rising energy costs,” analysts forecast. “We are observing both gas and coal price increases. Under such conditions, the next year will bring a significant increase in tariffs,” they added.
