Failure to raise interest rates risks losing control of inflation

The Monetary Policy Council did not surprise and did not raise interest rates. Analysts expected just such a decision, despite the fact that inflation in August rose to a record level of 5,4 percent. year on year, the highest since June 2001.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Inflation rages, interest rates unchanged

The recorded inflation significantly exceeds the level from the projection presented by NBP in July. At the same time, the strong increase in the prices of energy (6,1% y / y) and food prices (3,9% y / y) shows that in the coming months, inflation is not expected to fall. And its further growth is likely, even above 6%, which may force the council to react. However, at present, it is dominated by opinions about the temporary nature of inflation and fears of a monetary tightening in the face of possible subsequent scenes of the pandemic.

Therefore, it seems that the Council will wait with interest rate hikes until the November inflation projection is presented and the pandemic situation is cleared. It will probably also watch for decisions FED, as mentioned by the NBP governor in the last interview for PAP. However, it risks losing control over the ever-increasing prices in the absence of timely action.