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Poland Monetary Policy April 2022

Poland: Central Bank hikes rates by 100 basis points in April

At its meeting on 6 April, the National Bank of Poland (NBP) raised the reference rate by 100 basis points to 4.50%, marking the seventh consecutive rate hike and the largest since it began its tightening cycle in October 2021. The NBP also raised the Lombard rate to 5.00%, the rediscount rate to 4.55%, and the deposit rate to 4.00%.

The NBP’s decision came amid mounting price pressures, with inflation hitting 10.9% in March following Russia’s invasion of Ukraine. The print came on the back of soaring prices for fuel and energy, and the Central Bank now sees inflation remaining elevated this year. As such, the NBP decided to hike rates to reduce the risk of inflation staying above its 1.5–3.5% target band over the monetary policy horizon.

In its communiqué, the NBP’s forward guidance was broadly unchanged from last month. It stated that it will take “all necessary actions” to promote the stability of the macroeconomy and the financial system. Moreover, it said that “above all” its focus would be on reducing the risk of elevated inflation becoming entrenched. Given the Bank’s expectation that prices will remain “markedly elevated” this year, the majority of our panelists see a further increase in rates in 2022.

Regarding the outlook, Peter Virovacz, senior economist at ING, commented:

“Glapinski’s press conference confirmed our assessment that a 100bp rate hike was mainly triggered by the high reading of March inflation and prospects of it increasing further on the back of upward pressure of commodity prices as well as fiscal expansion. According to the NBP governor, rate cuts are possible at the end of 2023, and we assume that easing may rather start in 2024. At the beginning of 2023 – when the anti-inflation shields may be lifted, we see another CPI peak around 12%. In 2023 we still expect an expansionary fiscal policy from the national budget, maybe Recovery Plan. Also, 2023 is the last year of the old EU budget when spending usually mobilizes.”

The next monetary meeting is scheduled for 5 May.

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