There is no Budapest in Warsaw.  Hungary raises interest rates again, Poland still looms

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Who will suffer more from high electricity prices? ‘Business will pay more’

This is the fourth increase in interest rates in Hungary. The Hungarian National Bank has been doing this every month since June. This time, the main price rose from 1.50 percent to 1.65 percent. In total, since June, the benchmark has been raised by a total of 1.05 points.

The reason for the increase? inflation. Hungarian bank The central government continues the process of tightening monetary policy (aside from raising interest rates, it also announced, among other things, a reduction in the purchase of Treasury bonds). It also raised its inflation forecast for 2021 and 2022 – from 4.1 percent, respectively. to 4.6-4.7 on an annual basis and from 3.1 percent. up to 3.4-3.8 percent

From the announcements of the Hungarian National Bank (NBH), a picture emerges of fears and concerns about inflation expectations. In an August statement that followed the NBH meeting, it stated that the global increase in commodity prices in global markets was causing an acceleration of inflation in an increasingly broader range of industrial goods. The Hungarian monetary authorities estimate that the gradual translation of increases in commodity prices and transportation costs will be a determining factor in inflation expectations

– Pekao economists write in their commentary.

Are we losing 5% inflation? There were no such expectations until now

The Czech Republic is also likely to raise interest rates again soon

Another country in the region, fearing rising inflation and inflation expectations, has already begun a cycle of increasing interest rates. The Czech Republic has done it twice and looks set to do so again during the September 30th meeting.

So far, the Czechs have raised the main average by a total of 0.5 points in two increases. (from 0.25 to 0.75 percent), but it is likely that at the end of September it will immediately rise by another 0.5 percentage point, to 1.25 percent. More and more signals are coming from the Czech Central Bank on the need to speed up the process of raising interest rates.

The probability of raising the main rate in the Czech Republic by 0.5 p. It would be the highest one-time high in the country in 24 years.

Glapiński: Do you rate the hikes? It would be the school’s fault

The National Bank of Poland is still holding off on interest rate increases. Unlike their counterparts from Budapest and Prague, the majority of MPC members see no reasons for tightening monetary policy yet.

The head of the dovish group in the Monetary Policy Board is NBP Chairman Adam Glapinski, who said again during the press conference after the September meeting of the Monetary Policy Committee that inflation in Poland (5.5% in August, the highest in 20 years) due to supply shocks, which does not It is affected by the monetary policy of the Central Bank. The NBP governor says rising inflation is temporary and is not afraid of unending inflation expectations or a wage-price vortex.

We do not have any tools to counteract the increase in the prices of electricity, fuel, raw materials and global freight. If we had, we would have used it right away. But we have to rule the whole world. I’m not saying the world wouldn’t be any better. I assure you that if the NBP Board and the Monetary Policy Board had to run the world, we would live in a much better world

– Glapiński said. He has spoken very firmly, even confrontationally, about the idea of ​​increasing interest rates.

The central bank should not respond to negative supply shocks by raising interest rates. This would be a school error to stifle economic growth. Those who encourage higher interest rates are urging us into stagflation. I don’t know where these ideas come from. They are accepted at the level of ordinary people, but not at the level of people who have studied economics. I cannot imagine that someone, for example, who graduated from the Warsaw School of Economics, would say such nonsense. Criticize everything in it, it can only be lack of reason or bad will

– The head of the NBP commented.

It’s just that not everyone sees it the same way as Glapinsky and most MPC members. In recent days, economists at PKO Bank Polski have published an analysis showing that despite everything, factors that can be influenced by monetary policy play an increasingly important role in Polish inflation.

In the NBP narrative, regulatory factors and an increase in energy prices account for half of the current high CPI inflation (5.5% YoY). Our measure shows a clear trend of internal inflation and does not support such conclusions

– Economists at PKO BP write in their commentary.

Buying cereals, photo illustration.Agricultural products become much more expensive. “Food price forecasts are crystal clear”

On the other hand, Pekao Bank economists note that it may be interesting to follow the effects of higher interest rates in Hungary because the post-pandemic economic situation in this country and in Poland is similar in many areas.

First, both countries suffer from high rates of inflation. In August, consumer prices in Hungary rose by 4.9%. On an annual basis, and in Poland by 5.5 per cent. Second, GDPs in both countries are back to pre-pandemic levels, and they are at the forefront of the European Union for the fastest economic recovery. Thirdly, both Hungary and Poland are characterized by a lower level of unemployment compared to other EU countries (the unemployment rate in the LFS in August was at the level of 4.3% and 3.4%, respectively). Against the background of these similarities, the NBH and NBP ratings differ significantly in terms of inflation expectations and the reaction of monetary policy

– Write in their comment. They also add, the future will show whether NBP is late in the monetary tightening cycle, or whether the decisions of the Hungarian and Czech central banks are premature.

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