The MPC, as expected, did not raise rates before Christmas

The Monetary Policy Council left interest rates unchanged - the reference rate is still 6,75 percent. This decision results from the drop in prices in November and forecasts pointing to a sharp drop in inflation next year. However, before it happens, inflation in January may rise above 20 percent. Due to the MPC decision itself, loan installments do not increase, but the WIBOR 3M rate remains well above the reference rate NBPwhich causes them to grow.

Rates unchanged for the third time in a row

RPP decided once again not to raise interest rates, which means that the NBP reference rate is still at 6,75 pp. This is the third consecutive meeting during which the Council decided not to raise interest rates. This time, however, the Council met in a situation when there was the first drop in inflation since February. Inflation fell from 17,9 percent. y/y in October to 17,4 percent. in November. However, despite the decline inflation, CPI core inflation is still growing, which in November amounted to about 11,3-11,4 percent. And this proves that inflation is increasingly taking root in our economy and it will be very difficult to fight it.

In its decision, the Council relies on the November inflation projection prepared by NBP analysts. It assumes that next year there will be a significant economic slowdown, which will cause a spontaneous drop in inflation. However, before inflation starts to fall on its own, we will have to increase VAT on fuels, energy carriers and fertilizers from the new year. And this may boost inflation by 2-3 percentage points at a time, which may exceed 20% in January.

WIBOR 3M higher than the reference rate

Although the rates have not been raised, the WIBOR 3M rate, on the basis of which the interest rate on mortgage loans is calculated, remains above the NBP reference rate. This is another element that causes housing loan installments to increase. Currently, the WIBOR 3M rate is 7,20 percent, i.e. 0,45 pp above the NBP reference rate. Whereas since 2015, WIBOR 3M has been on average 0,27 pp higher than the reference rate. In periods of interest rate increases, this difference increased to 0,45 pp on average, while in the period of interest rate decreases, it decreased to 0,18 pp. This means that during interest rate decreases it can be expected that the difference between WIBOR 3M and the reference rate will decrease, probably however, there is no chance to make up for the current losses resulting from the much higher level of WIBOR 3M in relation to the reference rate. The persisting difference indicates that the market does not rule out further interest rate hikes in the future.

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.