According to economic experts, inflation in the coming months will exceed 10%, and interest rates in Poland may increase to 5-5.5%.
Jakub Rybacki from the Polish Economic Institute expects inflation to systematically exceed 10% in the coming months. The first such result can be seen in a month. Double-digit growth is sure to occur in April. In the coming months, inflation will be increased by fuel prices. In the second half of the year, the increases will also be visible among food and some other goods.
Consumer inflation in Poland amounted to 8.5% on an annual basis, according to preliminary data of the Central Statistical Office for February 2022, it was higher than economists expected. Average forecasts indicated that it will amount to 8.1%.
Interest rates have already risen six times in the current series of increases that have been carried out by the Monetary Policy Council (RPP) since October 2021. The main rate of the National Bank of Poland (NBP), the reference rate, currently amounts to 3.5%.
After the March rate hike, the NBP president, Adam Glapiński, emphasized that the RPP was determined to suppress inflation as soon as possible. According to the latest inflation projection of the central bank, without an increase in interest rates, the inflation could be double-digit and amount to an average of 10.8%.
The economists of mBank point out that in his speech the president strongly emphasized the need for quick and decisive action to counteract the persistence of the risk of increased inflation. In comparison with the assessments of the economy, which is in the phase of a major expansion by Glapinski, in the opinion of mBank, it provides a basis for raising the forecasts of target interest rates.
In economists’ opinion, the Council will bring rates to 5-5.5%, but it will not be as cost-free as CEO Glapiński sees it. The risk of a strong slowdown (and even recession) is quite real in such a scenario. And this gives hope for possible rate cuts in 2023. Such a scenario was expected before. Now the rates are simply raising and this will start the reduction.
They add that further increases are expected in the coming months. Experts see the target interest rate at 5%. – that is, by 1% higher than before the war in Ukraine.
Such a large increase in interest rates must mean an increase in interest rates on loans. Reaching the level of 5.5% means that the NBP reference rate would increase by 2%. If these forecasts were correct, interest rates in Poland would have increased to a level not recorded since the end of 2008 – that is, since the last great financial crisis.
With an increase in the reference rate to 5.5% the WIBOR 6M rate should increase to around 6.4%. One needs to add the bank’s margin. Taking into account that in September 2021 the average margin was 2.3%, the loan interest rate may be as high as 8.7%.
Arkadiusz Słomczyński