Interest rates – July 2022. Monetary Policy Council meeting on July 7 – the Polish Economic Institute expects the end of the interest rate hike cycle in July.

During the meeting in June, the Monetary Policy Board raised interest rates by 75 basis points. It was already nine in the morning Increase in interest rates in a row. The benchmark interest rate rose to 6.0 percent. This is the highest level since June 2008. The increase in interest rates correlates with the rapid rise in prices.

The next meeting of the Monetary Policy Committee is scheduled for Thursday, July 7th. According to the Polish Economic Institute linked to the Prime Minister’s Chancellery, interest rates will rise in July by 50 basis points to 6.5 percent. It will be the end of the price-raising cycle. Meanwhile, Ludwik Koteke, a member of the Monetary Policy Council, sees the next rate hike Must not be less than 100 basis points..

We expect this rate hike to be less than 100 basis points, perhaps 50, although this 75 scenario cannot be ruled out either. However, and more importantly, we are inclined to the opinion that this will be the last increase in the entire cycle – commented Paula Kokovich, PIE analyst on TVN24 “Get Up and Know”.

She also made it clear that the Monetary Policy Council, when deciding the level of interest rates, does not only take into account growth. inflation and price stability. – Here the head of (Narodowy Bank Polski, Adam – ed.) Glapiński declared that stable inflation would be a condition for breaking out of the cycle of increases. This was said to pertain to a situation where several consecutive readings show that inflation has not increased, while at the same time the other side of the factors taken into account was data from the real economy, indicating what could happen to GDP. Economic growth readings – explained by Kukołowicz.

As she noted, the incoming data is less optimistic because “several factors point to an economic slowdown.” – We are talking about consumer sentiment which is more pessimistic and pessimistic than it was at the beginning of the epidemic. We are talking about PMI readings that indicate the mood of producers in the industrial sector and in Poland this indicator fell below 50 points in May, which indicates a clear slowdown. This is also happening in the economies of the world – said the analyst PIE.

Paula Kokowicz was asked why the Polish Economic Institute expected the July rate hike to be the last in the cycle. Not only will inflation itself be significant, but it will also be core inflation, and therefore inflation that will not show an increase in the prices of food and energy commodities. Monetary policy has no effect on these factors, but it has a greater effect on cooling demand in other parts of the economy, as well as on cooling consumer demand, which will be shown by core inflation – answered Kukołowicz.

In her view, “it will be this reading (core inflation – ed.), which will be decisive, because we have no and will not have any influence on what will happen in the energy and food markets nor raise interest rates, and percentages here will not improve the situation ” .

PKO BP economists also assume that the MPC is nearing the end of its rate-raising cycle, although, as evidenced by the July rate hike, it will not be the last. “The board will remain willing to respond to the current rise in inflation in order to stabilize inflation expectations. That is why we expect an increase in NBP rates of 100 basis points in the third quarter of 2022 (the reference rate to 7.00 percent), in a two 50 basis point move in July and September “- we can read in the” Economic Quarterly “. According to the current schedule of MPC meetings, the August meeting scheduled for August 23 will be inconclusive.

In contrast, according to economists from Credit Agricole, interest rates will be raised by 75 basis points in July and another 50 basis points in September and October. “Therefore, the reference rate will reach 7.75% in the fourth quarter of this year, and the monetary policy tightening cycle will be completed” – economists from Credit Agricole wrote in the report.

According to economists at ING Bank Śląski, the market hopes that NBP will follow in the footsteps of the region. In case Hungarian The interest rate increase was 185 basis pointsa Czech 125 basis points. “This increases pressure on NBP. In such an environment, a continuation of the narrative around the end of the rate raising cycle approaching could weaken the zloty. The NBP rate is now 6.00 percent, and next week the MPC should raise 75 basis points (with upside risks) “- We can read in the “Dziennik ING” bulletin on Wednesday.

Economists at Millennium Bank’s decision of the Hungarian National Bank “has a neutral effect on the prospects for monetary policy in Poland.” “We are assuming next week’s NBP rate hike by 0.75 percentage point to 6.75 percent, which will not be the MPC’s last word in this cycle of monetary tightening,” they wrote.

According to Dr. Edita Wojtyla, an economist at WSB University in Pozna, in the current situation we cannot speak of “real expectations”. – Watching all the data from the economy, watching what’s happening and predictions, I’d say we don’t have real predictions, because the bombs are on Ukraine They are still going down (…) and I will be very careful about any statements we raise / do not raise (interest rates – editor), because at this point the policy of all central banks, most important in the world, is reactive and reacts to what is happening in the economy, not the other way around – I explained.

– Now it is the macroeconomic data, inflation data and currency strength data that will verify the decisions of the central banks. This happens in Poland and in the world, so politics is a reaction and there is also one that we cannot predict, because we cannot predict the further consequences of the war and what happens when it comes to the supply of raw materials in the world – Wojtyla said.

After the increases in interest rates, the level of the WIBOR indices also rises. WIBOR with bank margin are the components of the loan interest rate. Some banks use a 3M (three-month) WIBOR rate, which means that the mortgage interest rate is updated every three months from the moment the loan is disbursed. In the case of WIBOR 6M (six months), the interest rate is updated every six months. The above rates include potential interest rate increases or reductions that may occur during this period.

WIBOR 3M is 7.05 percent, and WIBOR 6M – 7.34 percent. This means that if we have or will update the premiums in the coming days, a potential July price hike will be included – at least in part – in that.

As stated by TVN24 Biznes Bartosz Turek, former chief analyst at HRE Investments, “In normal times, the difference between 3M WIBOR and the reference rate (…) should be about 0.25 percent.” – If we start to approach the end of the interest rate raising cycle, the aforementioned disparity should start narrowing towards the aforementioned 0.25 point. Percentage is explained.