Another Polish Interest Rate Hike
April 6, 2022
An increase of the National Bank of Poland’s policy interest rate to 4.5% from 3.5% announced today marks the seventh straight tightening from a pandemic low of 0.1% prior to last October. Such was the biggest incremental move in the current tightening sequence and was twice the size anticipated by analysts. 4.5% represents the highest rate level in 113 months.
In this region that includes Russia and Ukraine, some of the most aggressive tightenings of monetary policy this year have been occurring. For example, the Czech 2-week repo rate has risen since February from 3.75% to 5.0%, and Hungary’s policy rate has climbed two percentage points since January to 4.40%. Moldovia’s policy rate was 6.5% coming into 2022 and now is at 12.50%. Those at the Kyrgyz and Kazakhstan central banks (respectively 10.0% and 13.50%) are 200 and 375 basis points above levels at the beginning of 2022, and Russia’s central bank rate has soared to 20% from 8.5% so far this year. As for Ukraine the discount rate was lifted in January to 10% from 9%, but subsequent scheduled meetings have had to been postponed due to invading Russian forces.
Poland’s policy rate almost certainly hasn’t crested. From 2.3% in December 2020, Polish consumer price inflation has accelerated to 5.9% last September a month before the string of bank rate increases began, and it is now at 10.9%, more than double the 4.5% new policy interest rate. According to today’s released statement, “there persists a risk of inflation running above the NBP inflation target in the monetary policy transmission horizon…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. In 2022, inflation will remain markedly elevated, which – apart from factors previously amplifying inflation – will be due to the economic consequences of the Russian aggression against Ukraine.”
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: National Bank of Poland
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