Anniversary increase in interest rates. Rates up by 50 bp

The Monetary Policy Council raised interest rates by 0,5 pp. up to 6,5 percent This is the jubilee - tenth increase since October 2021. Is the series of hikes coming to an end?

The decision surprised the market

RPP yesterday raised interest rates by 0,5 pp. i.e. by 0,25 pp. less than most analysts predicted. After the increase, the basic interest rate is 6,5 percent. Such decisions were influenced by the growing number of people all the time inflationwhich in June was as much as 15,6 percent. Although unfavorable data have recently been coming from the economy, pointing to a possible occurrence recession, the peak of inflation is still ahead of us, so in the coming months inflation will increase even more. Its maximum level may be 17-18%, although it may be higher in the event of new problems with oil and gas supplies in Europe. Despite increases in official rates, the real interest rate in Poland (interest rate minus inflation) continues to decline and currently stands at -7,87 percent.

Also the recent significant weakening of the zloty had an impact on the council's decision. A rate hike may affect the strengthening of the zloty in the short term. Although the experience of Hungary shows, where in response to the weakening of the pound, the base rate was raised by 28 pp on June 1,85, the related strengthening may only be temporary. Therefore, today Hungarians raised rates again - this time the weekly rate by as much as 2 pp, once again trying to stop the weakening of their currency.

The next MPC meeting is only on September 7

The zloty is depreciating also due to concerns about the imminent end of the series of interest rate increases in Poland. Such a scenario is suggested by today's rate hike being lower than expected and deteriorating macroeconomic data from the economy, which herald a recession in the second half of this year. In August, the MPC meets, but it will not decide on the interest rates. The next meeting, at which there may be a rate hike, is scheduled for September 7th. The next data coming from the economy will decide whether the Council will raise rates once or twice after the summer holidays.

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.