The market expects one thing. What will the Monetary Policy Council do?

The highlight of the day in Poland is the meeting of the Monetary Policy Council (MPC). The market expects that in response to one of the highest inflation in the European Union, the Council will raise interest rates once again. However, the question about the scale of the rate hike remains open.

Afternoon decision

The MPC decision on interest rates will be announced in the afternoon as usual. The last time it was at 16:00 PM. Today, the statement following the meeting of the Council will also be published, and the president's press conference is scheduled for tomorrow National Bank of Poland.

The market expects the fifth interest rate hike in Poland since October 2021. A rate hike of 50 basis points (bp) is forecast, as a result of which the main rate will increase to 2,75%. This would be its highest level since July 2013.

However, the market admits that the rate hike will be higher and will amount to 75 bp, which will push the main rate up to 3,00%. The likelihood of such a scenario materializing increased significantly after the NBP governor Adam Glapiński said at the end of January that "interest rates in Poland should rise faster than the market currently expects, taking into account the latest macro data".

Monetary policy

A hike by 75 bp would also be justified from the point of view of strengthening other words of President Glapiński. Namely that "strengthening of the zloty would be consistent with the direction of the monetary policy pursued".

Regardless of the scale of the rate hike, the statement after the meeting will probably include references pointing to the need to strengthen the zloty as a means to fight high inflation in Poland.

The interest rate hike by 50 bp is not only discounted by the zloty, but may even be accepted with some disappointment, causing its weakening. Probably not much, as the market will wait for the Wednesday's conference of the NBP president.

An increase in interest rates by 75 bp, especially if it goes hand in hand with a strong indication of the need for zloty appreciation, may push the EUR / PLN rate to PLN 4,50-4,41. On Tuesday morning you had to pay PLN 4,5263 for the euro.

EUR / PLN daily chart. Source: Tickmill