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Interest rates 2023. Forecasts – Bank Pekao changes its forecast, what will be the decisions of the Monetary Policy Council of the MPC?

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Interest rates in Poland may be lowered in autumn 2023, according to the latest forecasts of Bank Pekao economists. Earlier, they predicted that the beginning of next year would be a more likely date for the first interest rate cut. Bank Pekao economists have announced the level of the NBP reference rate at the end of 2023 and 2024.

Bank Pekao economists have published the report “Economy in post-traumatic stress. Economic prospects for 2023-2024”. We read in it that the fall inflation in Poland to single-digit levels “is easy to imagine, but it should still surprise.” According to the forecasts of economists of this bank, inflation will fall to 7.2 percent. at the end of the year and throughout 2023 it will amount to 12.2 percent.

Interest rates 2023 – Bank Pekao forecasts

Bank Pekao’s economists also expect that in 2023 we will move from hikes to interest rate cuts. “The rate hikes of the major central banks will end in the first half of 2023. What’s next? Economic history teaches that monetary policy tightening – especially at such a rapid pace as in 2022 – effectively, though not immediately, extinguishes the economic situation, and after some time also pressure price,” the report said.

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Its authors indicated that “the first effects of this can already be seen on the credit market and in the banking sector. The sphere of the real economy will feel them throughout 2023.” “The economic downturn and falling inflation will give central banks room to cut interest rates. We think it will be greater in the US and euro area than in Poland” – assessed the economists of Bank Pekao.

According to analysts, the reference interest rate at the end of 2023 will fall to 6.50 percent. Their forecasts show that a cut of 25 basis points will take place in the fall. Just a few weeks ago, economists of this bank predicted that the beginning of 2024 seems to be a more likely date for the first interest rate cut.

Thus, the economists of Bank Pekao joined the economists of PKO BP, who had already expected that the first interest rate cuts would take place in 2023. Their base scenario predicts a decline of 50 basis points. This would mean that the reference rate will go down to 6.25 percent this year, which is more than expected by Pekao representatives.

According to Bank Pekao economists, the reference rate at the end of 2024 will be at the level of 4.00 percent.

Main interest rates of central banks and Pekao forecastsBank Pekao

Economists of other large banks in Poland are less optimistic about the timing of monetary easing. After Wednesday’s MPC decision, mBank analysts wrote that “the market is pricing in the first interest rate cut this year.” “These expectations will continue for some time. But we still disagree. Easing only in 2024” – they forecast.

ING Bank Śląski economists assessed that “persistently high core inflation will not allow for interest rate cuts in 2023, despite a clear fall in inflation”.

President of the National Bank of Poland on interest rates

President of the National Bank of Poland and at the same time the chairman of the MPC Adam Glapiński spoke during Thursday’s press conferenceIt’s too early to talk about lowering rates. – We do not believe that inflation is already under control, that inflation is already low. Inflation is very, very high, too early to discuss interest rate cuts. How inflation will decrease, as we predict, this issue will, of course, appear as a subject of discussion at the NBP – explained Glapiński.

– Further decisions of the Monetary Policy Council will depend on the incoming data and the assessment of these data – noted the head of the central bank.

Interest rates affect the quotations of WIBOR indices, which together with the bank’s margin are components of the loan interest rate, thus affecting the amount of monthly installments.

Main photo source: Paweł Supernak/PAP

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