Poland Monetary Policy June 2022

At its meeting on 8 June, the National Bank of Poland (NBP) raised the reference rate by 75 basis points from 5.25% to 6.00%, marking the ninth consecutive rate hike since it began its tightening cycle in October 2021. The NBP also raised the Lombard rate to 6.50%, the rediscount rate to 6.05% and the deposit rate to 5.50%—from 5.75%, 5.30% and 4.75%, respectively.

The NBP’s decision came amid surging price pressures, with inflation hitting an over 24-year high of 13.9% in May amid disrupted supply chains and higher energy and food costs due to the war in Ukraine. The Central Bank expects inflation to remain elevated but moderate going forward as a result of higher interest rates, the fading impact of current shocks and the appreciation of the zloty.

In its communiqué, the NBP reiterated that “further decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy”. As such, the majority of our panelists see further rate increases this year.

Commenting on the medium-term outlook, economists at ING stated:

“We estimate that the coming months will bring further increases in core inflation, with CPI reaching a local peak in the 15.0–20.0% range in the fourth quarter of the year. […] Past increases in energy, transport, material and labour costs are spilling over into the final prices of an increasing number of goods and services. This is supported by still robust demand, driven by rising incomes due to the tight labour market and fiscal expansion. An important risk to inflation’s path in 2023 is the scale of future increases in administered prices and decisions regarding the Anti-Inflation Shield.’

The next monetary meeting is scheduled for 7 July.

FocusEconomics analysts see the reference rate ending 2022 at 6.75% and 2023 at 5.84%.

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