National Bank of Poland Tightens

October 6, 2021

Poland’s is the latest central bank to hike interest rates in the face of above-target inflation. Whereas earlier rate increases announced in New Zealand and Iceland were not unexpected, a 40-basis point policy rate hike to 0.5%, which reverses the last of three cuts in the first half of 2020, had not been forecast. In explanation, officials said

the rise in global prices of both energy and agricultural commodities observed in recent months may still increase price growth in the coming quarters. Amidst probable further economic recovery and favorable labor market conditions, inflation may remain elevated longer than hitherto expected. Such a situation would generate a risk of inflation staying above inflation target in the medium term. In order to decrease the inflation to NBP target in the medium term, the Council decided to increase NBP interest rates. Moreover NBP may still intervene in the foreign exchange market and use other instruments.

Polish inflation had risen to 5.8% in September, well above the new policy rate level and also the medium-term inflation objective is 1.5-3.5%.  Additional interest rate normalization might be among the envisaged future actions. Prior to the 40-basis point rate cut to 0.10% in May 2020, the National Bank of Poland’s interest rate was reduced by 50 basis points each in March and April.

Some of the other monetary authorities that have raised interest rates since midyear are those of Romania, Mexico, Kyrgyzstan, Ukraine, Russia, Georgia, the Czech Republic, Kazakhstan, Hungary, Peru, Tajistan, Sri Lanka, Colombia, Jamaica, and New Zealand.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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