The MPC raised interest rates by 100 bp

The MPC raised the basic interest rate in Poland by as much as 1 pp. up to 4,5 percent This is the seventh rate hike in a series of increases that has been going on since October 2021. Despite a significant increase, Poland still has a real interest rate lower than the Czech Republic and Hungary. This affects deposit owners who have over 9% of their savings. annually.

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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.

The MPC raises interest rates by 100 bp

The MPC raised interest rates by 100 bpwhich means that the base interest rate is now 4,5 percent. The Council has been raising rates at each subsequent meeting since October 2021, this hike is already the seventh in the series. In total, the rates rose from 0,1 percent. up to 4,5 percent currently.

Most of the hikes to date have been 50 bp increases, but this time the council raised rates much stronger, mainly due to the intention to strengthen the zloty. The zloty is currently stronger than at the beginning of March, when it weakened spectacularly due to the situation in Ukraine. However, it is still much weaker compared to the average quotations from the last 2 years. The strengthening of the zloty has been stopped in recent days by the increasingly hawkish rhetoric of the Fed and the announcement of further rate hikes in the US.

The high rate hike is also a response to the spectacular rise in inflation which, according to preliminary estimates, amounted to 10,9% in March. (an increase from 8,5% in February). Although the current source of inflation are mainly external factors, including, above all, an increase in commodity prices, the MPC could not help but react to such a significant increase.

Real rates lower than in Hungary and the Czech Republic

The Council also followed the trend of rate hikes in Central Europe. Over the last two weeks, the rates have increased, among others, central banks in Hungary - up to 4,40 percent (with an inflation of 8,3% in February) and in the Czech Republic - up to 5%. (with inflation of 11,1% in February). However, even after such a rate hike, Poland still has the lowest real interest rate (interest rate minus inflation). In Poland it amounts to -5,77%, while in the Czech Republic it is -5,49%. and in Hungary -3,6 percent.

Higher interest rates should bring an increase in the interest rate on new bank deposits. However, the owners of previously opened fixed-rate deposits incur high losses. On an annual bank deposit established at the beginning of April 2021 and completed in March 2022, the real loss of its owner was 9,6%. This is due to the fact that according to NBP the average interest rate on deposits opened in April 2021 for a period of 6 to 12 months was 0,2%. Even when choosing the best deposits on the market at that time - with 0,8 percent interest.
- we lost as much as 9,1 percent