The MPC is getting out of practice in raising interest rates

At the fifth consecutive meeting of the MPC there was no interest rate hike. This decision was easier as we do not know the inflation reading for January yet. However, the recent weakening of the zloty reminded us of the threat if we do not fight inflation decisively. It seems that the MPC is slowly getting out of practice in raising rates.

Feet unchanged, again

At the second meeting this year, the MPC left interest rates unchanged, i.e. at 6,75 percent. This is the fifth consecutive meeting at which no increase was made - earlier, the Monetary Policy Council raised interest rates as many as 11 times: from 0,1 to 6,75 percent. It can be seen that the Council is slowly abandoning the habit of raising interest rates and it would be difficult for it to take another decision to raise interest rates.  

The level of Polish interest rates remains low in relation to inflation. In December, inflation amounted to 16,6 percent, which is almost 10 percentage points higher than in December. percent above the reference rate NBP (this is 6,75 percent). Data on inflation for January have not been released yet, but the market is sure that there was another jump in January. The beginning of the year is always the moment when entrepreneurs introduce new, higher prices. This year, there was also an increase in VAT on fuels and energy carriers. Forecasts of inflation growth in January are in a wide range of 17,5 to even 20 percent. And such an increase could speak for another interest rate hike.

The zloty stabilizes the exchange rate

Recently, the zloty has also experienced a weakening. One of the reasons for such weakening is the market's disbelief in further rate hikes that could strengthen the zloty. Not surprisingly, the outflow of capital to the USA, where the basic interest rate is 4,5-4,75 percent, while in Poland it is only 2 pp. higher. 

It seems, therefore, that there will be no more rate hikes in Poland. However, if inflation rose significantly in January and February, the MPC will have a serious discussion at the next meeting. 

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.