The Monetary Policy Council (RPP) decided to raise interest rates by 0.75 percentage points. The reference rate of the National Bank of Poland (NBP) increased to 6%, the lombard rate is 6.5%, and the deposit rate is 5.5%.

In response to rising inflation, the Monetary Policy Council started to raise interest rates in October 2021 and made them every month.

Market analysts expect one more rate hike in July by 0.5 percentage point, after which some experts forecast a peak in inflation and postponing further hikes by RPP.

“Inflation rose in May to 13.9% year on year (y / y) from 12.4% in April, seems consistent with the move by 75 basis points and the RPP shared the same opinion. In our understanding, inflation in June will increase again and will exceed 15% y / y and the Council will react with an increase of 50 or 75 points in July”, said Marcin Luziński, Santander Bank Polska analyst.

Bank Pekao analyst Piotr Bartkiewicz does not fully agree with his opinion. He said that the statement after the RPP meeting was practically unchanged from the previous one and kept “open form”. “The Council does not commit to any scenario and any particular target level of interest rates” – he stated.

The economists of PKO Bank Polski state that “due to the persistent strong pressure on a further increase in commodity prices (including oil) and food, we do not rule out that the inflation peak may shift from June-July to the second half of the year».

In their opinion, this would suggest that either the RPP should consider whether it is ready to continue the rate hikes after the holiday break in August (which will deepen the negative impact of hikes on weakening economic activity), or it should revise its communication policy which axis has been the declaration that rate hikes will be continued as long as inflation continues to rise.

Adrian Andrzejewski