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Poland Monetary Policy March 2022

Poland: Central Bank hikes rates by 75 basis points in March

At its meeting on 8 March, the National Bank of Poland (NBP) raised the reference rate by 75 basis points to 3.50%, marking the sixth consecutive rate hike and the largest since it began its tightening cycle in October 2021. The NBP also raised the Lombard rate to 4.00%, the rediscount rate to 3.55% and the deposit rate to 3.00%.

The NBP’s decision came amid rising price pressures, with inflation hitting an over 20-year high of 9.2% in January before subsequently easing to 8.5% in February. While the Bank continues to attribute this mostly to transitory factors, it now sees inflation “remaining at an elevated level also in 2022”, particularly given the shock to prices due to the Russian invasion of Ukraine. As such, the NBP decided to hike rates to mitigate the risk of inflation staying above its 1.5–3.5% target band in the medium term.

In its communiqué, the NBP stated that “decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy”. As such, the majority of our panelists see further rate increases throughout Q2.

Regarding the outlook, Kevin Daly and Tadas Gedminas, economists at Goldman Sachs, commented:

“Set against a challenging inflation and external backdrop, we expect policy tightening to continue and for policy rates to reach at least 5.50%. While the extent and pace of tightening will hinge on factors such as uncertain geopolitical developments, we continue to see the ongoing crisis as unambiguously hawkish and inflationary in the near term, which will continue putting pressure on the NBP, and we do not think it has the policy space as other major central banks to look through or attempt to balance policy to counteract negative growth effects.”

The next monetary meeting is scheduled for 6 April.

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