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Tuesday, May 28, 2024

Interest rates in Poland. Waldemar Buda Minister of Development on interest rate cuts in 2023

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This year, the Monetary Policy Council (RPP) may even decide to cut interest rates twice. This follows from the words of Waldemar Buda, Minister of Development and Technology, who spoke on Radio ZET about the prospects for inflation in the coming months.

On Sunday, the President of Law and Justice Jarosław Kaczyński announced the indexation of the 500 plus benefit to PLN 800. The increase will take effect from January 2024. Minister in the Chancellery of the Prime Minister Łukasz Schreiber announced on Tuesday in “Rozmowie Piaseckiego” on TVN24that the law on increasing the benefit in the 500 plus program to PLN 800 will be adopted during this parliamentary term.

According to the Minister of Development and Technology, Waldemar Buda, “for several reasons, it should not have been discussed earlier” and to deny the planned indexation of the 500 plus benefit. Buddha pointed out on the economic aspect.

800 plus and inflation

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– From the economic point of view, talking about increasing spending and higher consumption in a situation where inflation is growing very dynamically and talking about it two months ago would be very irresponsible from the point of view of financial markets – said the Minister of Development on Radio ZET.

– Today we are after two full months of lowering inflation. We are after eight meetings of the Monetary Policy Council, which did not raise rates. This is only a responsible moment from the point of view of finances, a responsible state, to talk about it and talk about it in a forward perspective, he stressed.

Waldemar Buda was asked whether the 800 plus from January 1, 2024 would not lead to stopping the fall in inflation. – Then we will have 8.5 (percent) inflation and we will be after the first reduction, or after two reductions, of interest rates. Inflation will fall all over the world – said the head of the Ministry of Agriculture and Tourism. According to Buda, 800 plus “will allow us to rebound economically”.

If the MPC actually lowered interest rates, it would be good news for people repaying PLN housing loans. This applies to loans with a variable interest rate, based on i.a. o WIBOR 3M or WIBOR 6M. HREIT analysts indicated in a recent analysis that in the event of the scenario of the first rate cut in 2023, the loan installment may fall by about 5 percent. by the end of this year.

Interest rates in Poland

During its May meeting, the Monetary Policy Council decided to keep NBP interest rates unchanged. It was the eighth meeting in a row when the MPC did not change interest rates. The main reference interest rate has remained at 6.75% since September 8, 2022.

PAP

The President of the National Bank of Poland and at the same time the chairman of the Monetary Policy Council, Adam Glapiński, emphasized during the press conference on Thursday that the Council has not finished the hike cycle yet. – We are ready to react immediately if something happens differently from our projection, so we are not ending the cycle of hikes – declared Glapiński.

– If inflation breaks up from the corridor we predict, we are ready to react, but we are also ready to react in the other direction, if the scenario is exceptionally good. Will it be at the end of this year? We’ll see, nothing can be said in advance – added the head of the central bank.

When asked about the possible date of the first interest rate cut, Glapiński mentioned e.g. about recent statements in the media by some MPC members. – I know that some members of the Council mentioned that such a situation may occur at the end of the year, or in the last quarter, I could agree with them, but there is no point in bringing it up, because at present it is far premature (…) – said the chairman of the MPC, with the reservation that the decision on interest rates is taken by the ten-member Council.

The next MPC decision-making meeting will be held on 5-6 June.

Interest rates and WIBOR

As a rule, decisions of the Monetary Policy Council affect the level of WIBOR ratios. WIBOR rates include probable increases or decreases in interest rates that may occur during this period. If the housing loan has a variable interest rate, changes in WIBOR affect the installment amount.

A loan with a variable interest rate consists of the bank’s margin and the WIBOR index. In turn, a loan with a periodically fixed interest rate consists of the bank’s margin and a fixed interest rate.

Some banks use the WIBOR 3M (three-month) rate, which means that the interest rate on the mortgage loan is updated every three months from the moment the loan is launched. In the case of WIBOR 6M (six-month), the interest rate is updated every six months.

Currently, WIBOR 3M is at the level of 6.90 percent and WIBOR 6M is 6.95 percent.

Main photo source: Shutterstock



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