Monetary Policy of Poland, July 2022

At its July 7 meeting, the National Bank of Poland (NBP) raised its key base rate by 50 basis points from 6.00% to 6.50%. This was the tenth consecutive rate increase since the start of the tightening cycle in October 2021. The NBP also raised the Lombard rate to 7.00%, the rediscount rate to 6.55% and the deposit rate to 6.00% from 6.50%, 6.05% and 5.50. %, respectively.

The basis for the NBP decision remained the same, namely rising price pressures, with inflation hitting a 25-year high of 15.5% in June amid disruption to supply chains and rising energy and food prices due to the war in Ukraine. The Central Bank expects inflation to remain high but moderate going forward as a result of higher interest rates, easing the impact of current shocks and appreciation of the zloty. However, he also took on a slightly dovish tone, citing weaker concerns about global growth.

In its communiqué, the NBP confirmed that “there remains a risk that inflation will exceed the NBP’s inflation target in the monetary policy transmission horizon.” Politicians also reiterated that their decisions would be based on data and the impact of the ongoing war in Ukraine on the Polish economy. However, most of our experts see further rate hikes this year.

Commenting on the short to medium term outlook, analysts at Goldman Sachs said:

“We expect core inflation to continue rising through the end of the year. Adding to this the fact that inflation expectations remain close to all-time highs, the broad nature of price increases and that the exchange rate may remain under pressure amid global financial tightening, we believe the NBP will need to tighten policy further. While at the last MPC meeting, NBP Governor Glapinski made his most optimistic forecast to date, we believe that economic conditions will require further rate hikes and we recently revised our final rate forecast for Poland from +7.00% to +8.00%.” .

The next money meeting is scheduled for September 7th.

FocusEconomics Consensus Forecast experts are still assessing the latest developments, and new forecasts will be released on August 2.