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Saturday, October 23, 2021

Monetary Policy Council: Interest rates up. Reasons for the increase in feet

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It was a surprise, because a month ago the NBP governor said that there are no reasons to raise interest rates – economist Ignacy Morawski assessed in “Get up and you know”. He pointed out that there were two reasons for such a decision – the weakening zloty and inflation. The Monetary Policy Council at its one-day meeting on October 6 unexpectedly increased the reference rates by 40 bp. to 0.50%, Lombard by 50 bp. to 1.0%, rediscounting bills of exchange by 40 bp. to 0.51%, discount bills of exchange by 40 bp. up to 0.52 percent The MPC kept the deposit rate at 0.0%.

None of the economists surveyed by PAP Biznes before the October meeting of the MPC (20 centers) expected changes in interest rates this month. – The question what has changed is that a month ago the NBP governor saw no reasons to raise rates – wondered Ignacy Morawski on TVN24. According to him, there are two reasons for the change of decision – one is economic, the other is political.

The reasons for the increase in interest rates

– In the last month the zloty depreciated quite significantly and it was said in the market that the central bank was late with interest rate increases, because they were already rising in other countries. We have higher and higher inflation, weaker zloty and I think that the central bank was a bit scared of such a spiral that the market will expect that we are pursuing a loose monetary policy, so it will weaken the zloty. This will raise inflation and further weaken the zloty, so I believe that the market conditions have pushed the central bank to the wall – said Morawski.

MPC communiqué after the meeting

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The favorable economic situation is expected to continue in the coming quarters, although the autumn wave of the pandemic remains a factor of uncertainty – it was written in the statement after the meeting of the Monetary Policy Council. Due to the risk of inflation persistence above the target, the Monetary Policy Council raised interest rates on Wednesday. striving to bring inflation down to the target in the medium term, the MPC said in the statement after the meeting. At the same time, the NBP may continue to use foreign exchange interventions and other instruments provided for in the Monetary Policy Guidelines – we read in the press release.

Last year, the Monetary Policy Council cut interest rates three times: on March 17, April 8 and May 28. The interest rates were raised for the last time on May 10, 2012.

NBP reference ratePAP


Interest rates up – loan installments will increase

The decisions of the Council affect the wallets of Poles. In the event of an increase in interest rates, borrowers can expect higher loan installments.

Higher interest rates mean at the same time a higher three-month WIBOR, which is most often the basis for the interest rate on mortgage loans in PLN. – WIBOR does not change in exactly the same and at the same time as NBP interest rates, but in a very similar way – Jarosław Sadowski, chief analyst of Expander Advisors, recently explained in an interview with TVN24 Biznes.

At our request in mid-September prepared a simulation of the increase in loan installments in case of changes in WIBOR 3M.

Loan installments from 2021 – simulationJarosław Sadowski, Chief Analyst of Expander Advisors, for TVN24 Biznes

2008 loan installments – simulationJarosław Sadowski, Chief Analyst of Expander Advisors, for TVN24 Biznes

NBP president on interest rate hike

On Tuesday, the president of the National Bank of Poland, Adam Glapiński, admitted that the necessity to adjust the monetary policy, ie to raise the interest rates, is approaching. However, the head of the central bank added that this should not obscure the broader picture of the challenges facing the Polish economy.

– We say with full conviction that inflation is temporary, but we have to see if this temporary inflation resulting from external supply shocks does not transfer to the economy in the form of a spiral of prices and wages, wage demands in particular. This is not the case at the moment. (…) But what will happen (such a situation – ed.) In two, three, four or five quarters, because we rely on it, if we believe that such a threat exists, we will need to definitely withdraw monetary accommodation, i.e. low feet, he added.

Moreover, Glapiński said that lowering the level of NBP asset purchases “almost to zero” is the equivalent of an increase in interest rates.

Main photo source: Shutterstock

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