September 29, 2022

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Interest rates - September 2022. Monetary Policy Board meeting, WIBOR 3M and WIBOR 6M up - Rafał M Miscellaneous Comments

Interest rates – September 2022. Monetary Policy Board meeting, WIBOR 3M and WIBOR 6M up – Rafał M Miscellaneous Comments

The three-month value of WIBOR (3M) has risen above 7 percent and is currently at its highest level since September 2004. The six-month WIBOR (6M) is also up. – There is a growing possibility that the Monetary Policy Board will still have to increase interest rates significantly – Economist Ravi Mandiri told TVN24 Biznes. The increase in WIBOR rates is bad news for borrowers, especially those whose installments will be updated in the coming days. WIBOR determines the interest rate of the loan, and therefore the amount of installments paid.

from the introduction Central Bureau of Statistics data Shows that the inflation In August 2022 it was 16.1% YoY. Analysts expected a 15.5 percent increase in prices. So, as economist Ravi Mundry pointed out in an interview with TVN24 Biznes, the potential for more of them is increasing. interest rate increases.

There is a growing possibility that the Monetary Policy Board will continue to have to raise interest rates significantly. Economists had expected inflation in August to be lower, so the Monetary Policy Council would have no reason to raise interest rates, but it turned out that inflation was a very negative surprise – the economic analyst noted.

Read also: How high will interest rates go? Economists’ predictions

Mundy drew attention to the previous statements of National Bank of Poland Chairman and MPC Chairman Adam Glapinski.

– The President of the National Bank of Poland, Adam Glapinski, said at press conferences after the monetary policy council meetings, that if inflation grows, interest rates will be raised further. These conditions were met in August, so the market expects the board to raise interest rates in September. The economist noted that WIBOR, that is, the cost of an interbank loan, is already anticipating and discounting it.

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PAP / Maciej Zieliński

Why is WIBOR important to borrowers?

WIBOR with bank margin are the components of the loan interest rate. Some banks use the 3M WIBOR rate, which for the borrower means that the mortgage interest rate is updated every three months, starting from the moment the loan is disbursed. In the case of WIBOR 6M, the interest rate is updated every six months.

Therefore, although the rates for WIBOR 3M and WIBOR 6M increased this week, they do not affect the amount of the premium paid immediately. We will only see the changes when the interest rate on our loan is updated. And then we will also receive an updated repayment schedule.

WIBOR rates are set on every business day, however, we don’t know its value on a particular day until 23.00.

On Monday, WIBOR 3M rose to 7.16%, the highest level since September 2004, when WIBOR 3M hit 7.18%. Its value is also higher than it was three months ago, at the beginning of June this year. WIBOR 3M was about 6.7 percent. This means that the borrower whose installment amount will be updated in the coming days can expect to increase it.

WIBOR 3M in the past three monthsstooq.pl

The value of WIBOR 6M also increased, which amounted to 7.36%. WIBOR 6M is definitely higher than it was six months ago. At that time, its value was 4.23 percent, therefore, upon receiving the updated loan repayment schedule in the coming days, we will see a clear increase in the premium.

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WIBOR 6M in the past three monthsstooq.pl

Another meeting of the Monetary Policy Council – in September

WIBOR rates include potential increases or decreases in interest rates that may occur during this period. The next MPC decision meeting will be held on Wednesday.

The cycle of raising interest rates has been going on since October last year. Since then, the Monetary Policy Board has raised interest rates every month. The prime rate is now 6.50 per cent.

Rafai Mundry explained, however, that for WIBOR 3M and WIBOR 6M, the reference point is the amount of Lombard’s rate, which is currently at 7.00%.

– It is the Lombard rate that should limit WIBOR. The Lombards rate is now 7.0 percent, of course WIBOR 3M, 6M, 12M is now above that level, because the market expects NBP to raise these rates higher in the near future. WIBOR 3M or WIBOR 6M or 12M is the rate at which banks lend money to each other for this period, so the bank must predict what rates will be at that time and borrow at a slightly higher interest – said the analyst.

Mondry does not want to prejudge what decision the monetary policy board will take at the September meeting. – When the Monetary Policy Board surprised analysts’ expectations of whether prices would rise by 25, 50 or 75 basis points, it was always low, that is, it raised rates as little as possible. Everyone is expecting an interest rate hike now, and more than one thing, which is normal, because these conditions have been met, and inflation is still growing very strongly, while the question whether the electoral calendar factor will not be included and I have very he has assessed concerns Strong on this matter and analysts should take this into account in the analyses.

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Let’s remember that work is underway to replace the WIBOR indicator. The Warsaw Deposit Market Index (WIRD) may become a new indicator for calculating the interest rate on loans. According to the head of the Polish Development Fund, Bowie Boris From next year, loans based on the new ratio should appear in the Polish banking sector.

Main image source: stock struggle