The Monetary Policy Council (MPC) on Wednesday, June 8 will make a decision on interest rates. Economists are convinced that the main NBP rate will go up again. However, there is no unanimity as to the scale of the increase. The forecasts published in the recent days are presented below.
During the May meeting, the Monetary Policy Council decided to an increase in interest rates by 75 basis points. It was the eighth consecutive interest rate hike. The cycle began in October 2021. The reference rate increased to 5.25% at that time, the highest level since November 2008. At that time, the main NBP rate was 5.75 percent.
The increase in interest rates is related to the rapidly rising prices. On Tuesday, the Central Statistical Office announced in a preliminary estimate that the prices of consumer goods and services in May 2022 increased by 13.9 percent. year on year, and compared to the previous month they increased by 1.7%.
– We will continue to raise rates until we are sure that it will be permanently (inflation – ed.) will lower. This is our task as the National Bank of Poland – said the president of the central bank and at the same time the chairman of the MPC Adam Glapiński during the press conference which took place on May 6 this year.
Therefore, according to economists, the MPC will decide to raise interest rates next Wednesday.
How much can interest rates rise?
In the commentary to the latest inflation reading in Poland, economists from PKO BP indicated that “the MPC may react with another large interest rate hike”, of the order of 75-100 basis points.
In the opinion of Bank Pekao economists, the high inflation reading in May and high core inflation determine the continuation of the interest rate hikes cycle. At the next meeting in June, the Council will raise the reference rate by 75 basis points up to 6 percent – Pekao representatives forecast. This would be the highest level since June 2008.
Economists from Goldman Sachs, mBank and BNP Paribas also expect that the Council will raise the main reference rate by 75 basis points. In turn, according to analysts of Morgan Stanley, the Monetary Policy Council will slow down the pace of monetary policy tightening and in June it will decide to raise by 50 basis points.
ING Bank Śląski economists pointed to the increase in core inflation to around 8.6 percent. year on year from 7.7 percent in April. It was noted that this was the fifth month in a row in which core inflation had risen by around 1 percent. month to month. Core inflation is calculated excluding energy prices and food.
“As a result, the core inflation in the coming months should be the core inflation, which suggests that the price pressure from the earlier increases in energy and commodity prices spills over into a wider and wider range of goods and services. interest rates in order to limit consumer demand and pressure on price increases, “we read in a commentary by ING Bank Śląski.
In the opinion of the bank’s economists, “such high and sustained core inflation is a signal that the price spiral is getting out of control and may very alarm the Council”. “The path of core inflation gives the MPC the green light for a solid interest rate hike in June, even by 100 bp“- they forecast. According to ING economists, the peak of inflation will be 15-20 percent in the fourth quarter of this year, and the main NBP rate will ultimately increase to 8.5 percent.
“We are signaling, however, that the level of CPI (consumer inflation – ed.) And the dynamic increase in core inflation indicate that the target interest rate in Poland will be closer to the upper limit of our warning range of 5-10 percent.” – they added.
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