June 27, 2022

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interest rates.  More increases are inevitable

interest rates. More increases are inevitable

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It is not known why the MPC session has been accelerated since January interest rate increases They were too low. The situation of MPC and NBP becomes more difficult. Consumer Price Index Inflation It accelerated to 8.6 percent in December. This is the sixth month in a row that it has been growing. The rate of price growth is the highest in 21 years. The high rate of inflation in the CPI was last recorded in November 2000, when it reached 9.3%.

Inflation is rising faster than analysts expected. Market consensus expected a result of 8.3% in December. Inflation for the sixth time in a row turned out to be higher than expected by analysts.

– Now we have a nervous situation, on the one hand, the MPC would like to do something about the rising inflation, but on the other hand it is afraid to do too much and slow the Polish economy – says Dr. – The Monetary Policy Committee is in an uncomfortable situation, and accelerating its meeting by a week has not changed anything.

Central banks must make decisions gradually, changing interest rates in cycles. The reductions and increases should be spread over several months. Also for this reason, to respond to the information received.

Just before CSOs released preliminary inflation data in December, Preceded by NBP At the press conference held after the Monetary Policy Committee meeting, he stated Would definitely recommend another price hikeMaybe by 50 points. Baseline, as in early January. The acceleration of the eight-day MPC meeting made many analysts wonder whether an interest rate hike will be announced. However, this did not happen.

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Despite the rate hike in January, the inflation rate exceeded 6 percentage points. Its percentage is higher than the NBP base rate, so at the beginning of January it was worth considering whether this increase should be higher – adds the XTB expert. – The effect is that More increases will be needed in the following months. What is also important is that market expectations of a rate hike after the January MPC meeting did not go down, and now the market is already assuming that the policy rate will rise to at least 4%.

The peak of inflation is still waiting for us. Recently, NBP estimated that it would happen in January 2022, and now this forecast relates to the end of the first half of the year.

– It is not known when this will happen, because the effects of the increases are very noticeable to society, and the government, for reasons of image, takes various measures to postpone subsequent price increases – assesses P.Kwiecień.

The battle to control inflation is getting tougher. The external situation is unfavorable because of Energy commodity price increases In Europe, bolstered by Russia’s gas supply policy and rising carbon dioxide emissions contracts prices, the ETS system is flawed, and the Polish government’s actions to change it are correct. However, inflation is also influenced by internal factors, Attempts were made to contain the price hike too late.

– The situation is especially dangerous when we get used to the fact that everything is more expensive, because high inflation expectations can be difficult to overcome – explains the XTB expert.

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