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Thursday, October 28, 2021

Analysts do not rule out another interest rate hike this year

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According to analysts, the Monetary Policy Council may decide to raise the NBP interest rates again in November. According to experts, the scale of the increase will be determined by the November inflation projection.

In the comment after Thursday’s press conference of the President of the National Bank of Poland, Adam Glapiński ING analysts point out that the key to the next hike will be the update of the projection in November, as this, according to the bank, should show the CPI in 2023 above the previous projection (3.4% y / y on average), so the CPI will be outside the range goal in the long term.


Inflation higher than assumed by the MPC?

Another factor that, according to ING, may induce the MPC to raise interest rates again is the level of inflation. The MPC assumes that inflation may rise to 6% by the end of the year, and according to analysts from ING it will be even 6.8%. year on year in December.

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Moreover, other MPC members may see a greater risk of second-round effects than the NBP governor.

“In our view, another rate hike in November, along with the new inflation projection, is still likely. We expect a 25bp rate hike, but we do not rule out 50bp. In 2022, the reference rate should reach the target of 2%.” – we read in the ING comment.

Also, according to analysts of the Polish Economic Institute, the scale of interest rate increases will be determined by the November inflation projection.

Adam Glapiński on a possible rate hike

In their opinion, Thursday’s press conference of the NBP governor did not clearly answer the question whether the last rate hike was the beginning of the rate hike cycle.

Adam Glapiński said on Thursday that the communiqué after the MPC meetings should be read very carefully. – Every sentence counts, sometimes every word counts, but also every sentence that does not exist. It is no coincidence that in yesterday’s announcement there is no sentence that says that this is the beginning of the tightening cycle, but there is also no sentence which implies that it is a one-off action. This is thoughtful, he said. “For now, we will be looking at what the reaction will be to our decision and we hope it will be positive,” he explained.

PIE analysts forecast that by the end of 2022 interest rates will return to pre-pandemic levels (1.5 percent). The target shape of monetary policy will, however, strongly depend on the economic situation.

They point out that the president of the NBP, Adam Glapiński, points out that the problems of shortages in the energy market suggest both the possibility of a slowdown in economic activity and the persistence of high inflation.

Main photo source: Shutterstock

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