Inflation in Poland continues to rise, and with it the Monetary Policy Council raises interest rates. It turns out that the September raise decision may not be the last of its kind.
Isn’t this the end of interest rate hikes? This is indicated by many voices from the market. Members of the Monetary Policy Council, i.e. of the body directly responsible for making such decisions are also increasingly talking about the need for further increases.
Interest rate 10 percent?
Inflation in August was 16.1%. The Monetary Policy Council has been trying to fight price increases for several months, but the effect is still insufficient. Some members of the key body of the National Bank of Poland believe that further tightening of fiscal policy should be expected.
“Today there is no doubt that rates in Poland need to be raised. Whether it is necessary to raise them at the next meeting is a completely different question, but that the rates need to be raised today, there is no doubt that they are clearly underestimated and that at subsequent meetings it would not be a reasonable strategy to continue to raise them by 0.25 points. MPC member Joanna Tyrovich said on the Subjective Finance podcast. “We are talking about raising the interest rate by 2-3, potentially by 4 percentage points. maximum, for today, with today’s data, after evaluating how effective previous increases were” she added. Recall that the base rate of the National Bank of Poland is currently 6.75 percent. Climbing through 4 p. would mean exceeding the level of 10 percent.
Lots of uncertainty
Why is it so difficult to fight inflation? The main reason is the uncertainty associated mainly with the complex geopolitical situation. Inflation is exacerbated not only by internal factors, but mainly by the Kremlin’s energy blackmail and the war in Ukraine.
“If we were only dealing with these standard indicators of our economy, and there was peace and order in other places, then it would be quite clear what needs to be done - in the face of this biggest unrest, a more radical approach to raising interest rates may be desirable “. Tyrovich said.
In addition, expansionary fiscal policy is important as it dampens the impact of monetary policy, she added. “Given that, monetary policy needs to be even more restrictive than it would be under normal circumstances – rates need to be higher and need to stay at that higher level for a longer period of time to achieve the same goal.” said the new MPC member.
Source: Wprost
