December 6, 2022


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Inflation and interest rates - July 2022. What will be the peak of interest rate increases in Poland?  Goldman Sachs forecast, Lloyatan Union

Inflation and interest rates – July 2022. What will be the peak of interest rate increases in Poland? Goldman Sachs forecast, Lloyatan Union

Inflation in Poland has remained at its highest levels for more than 25 years. Does this mean that the Monetary Policy Council will decide to raise interest rates again? There are new economists’ forecasts. The next decision-making meeting of the Council will be held in early September.

from the introduction Central Bureau of Statistics data It states that in July 2022, prices of consumer goods and services increased by 15.5 percent year on year. same level inflation It was also recorded in June of this year.

Regarding high inflation, we also note interest rate increases. The first of the current series of increases occurred in October 2021. Since then, the Monetary Policy Board has raised interest rates every month. During the July meeting, the Monetary Policy Committee raised interest rates by 50 basis points. The benchmark interest rate rose to 6.50 percent.

The MPC’s next decision-making meeting will be held on September 7. According to the current schedule, the meeting scheduled for August 23 will not make a decision on it.

What will be the peak of high interest rates?

Will interest rates rise and perhaps how far? Economists pointed to more MPC decisions in comments on recent inflation data.

Goldman Sachs economists expect the MPC to make further rate hikes, which will end at 8 percent. As they noted in the press release, inflation remained unchanged in July and settled at 15.5 percent on an annual basis, which is just below the consensus and their expectations. GS economists expected prices to rise 15.7 percent year-on-year.

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In their view, inflation remaining at high levels accompanied by pressure on further depreciation of the zloty “requires further tightening and NBP maintains its hawkish bias”.

According to Marius Zielonka, an economist at the Leviathan Union, “Any change in the annual dynamics of price growth may not be an indication that the MPC is waiting, which was mentioned by NBP Chairman Adam Glapinski.” “Our scenario with maximum interest rates at the level 6.5 percent He is getting closer and closer to implementation ”- noted Zielonka.

Analysts from the Polish Economic Institute noted, even before the release of preliminary inflation data in July, that Poland’s interest rate hike cycle is coming to an end. “We expect that the MPC will not raise rates in September – meaning that NBP will end the cycle at 6.5%.” – He wrote in the weekly report of the Polish Economic Institute published on Thursday.

“This will be a result of weak economic conditions. The Central Bureau of Statistics indicates that growth in retail sales is weak in June to only 3.2%. On the other hand, NBP surveys indicate that businesses are getting weaker. An economic slowdown means lower GDP growth and lower inflation” .

PAP / Maciej Zieliński

Adam Glapinsky on interest rates

NBP Chairman Adam Glapinsky, who is also the Chairman of the Monetary Policy Committee, was asked by the PAP about the expected rate hike at the September meeting. The central bank chief responded: “If the forecast comes true, and according to today’s assessment, it can be said that it will be possible to end the monetary policy tightening cycle soon.” The NBP chief’s answer was published on July 14.

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According to Glapiński, in 2023, with a rapidly declining GDP growth rate, it will be possible to make cuts in interest rates. “However, other decisions will depend on the information received regarding inflation expectations and economic activity,” the NBP governor said.

On Saturday, July 16, a recording appeared on Agroni’s Facebook page, showing how An activist for this organization meets the President of the National Bank of Poland, Adam Glapinski, during a walk on the sidewalk in Sopot. In this conversation, the head of the central bank said, among other things, the level of NBP interest rates. – Glapiński pointed out – at the moment we have the highest interest rates and the highest inflation rate of 15.5 (% – ed.). When asked if there will be any further increases, he indicated that “if there is an increase, 0.25”.

Main image source: TVN24