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Interest rates unchanged: pause or end of hike cycle?

Interest rates unchanged: pause or end of hike cycle?

created Forex ClubJanuary 4 2023

At the fourth consecutive meeting, the Monetary Policy Council did not raise interest rates - the basic rate is still at 6,75 percent. We still do not know whether this is just a pause or the end of the hike cycle. We will know the answer in the next few months. Without waiting for an answer, 28,5 percent of Poles making financial New Year's resolutions plan to repay their debt in 2023.

Interest rates unchanged but is this the end?

In January RPP exceptionally, it deliberated before the publication of the CSO data on inflation in December, and no new inflation projection appeared. Therefore, the Council took decisions on the basis of premises similar to those recorded during the meeting in December. However, inflation forecasts for December indicate that we will have to deal with another decline in inflation. The situation may be reversed in January, as the VAT on fuels and energy has increased since the New Year, and the prices of many other products and services have increased. Although the price of fuel at petrol stations has not increased, and the net price has decreased significantly, a strong inflation spike in this place is still possible. After the incoming data, probably at the end of the first quarter, we will find out whether there will be any more hikes in this cycle, or maybe it is already its end and in the coming years it will be dominated by rate cuts. It should not be forgotten, however, that inflation will not fall quickly and will probably remain above 18% for about 10 months.

The MPC also pays attention to data from abroad. In Germany In December, inflation fell from 10 percent. to 8,6 percent (definitely stronger than analysts expected). However, the prices of services continue to increase significantly. It is their growth that is currently the driving force behind inflation in most countries, when fuel and energy commodity prices are falling. On Friday we will get data on inflation in the euro zone, forecasts indicate its decline from 10,1 percent. to 9,7 percent Also in the US, we expect another drop in inflation from 7,1% to 6,7%. to 12.01 percent (data will be published on XNUMX).

Hope for borrowers?

No increase in interest rates means that the installments of loans with variable interest rates will not increase. Borrowers may even feel some relief, as the WIBOR 3M rate, which is used as the basis for calculating the interest rate on most housing loans, has been falling since November. Although the installments are not increasing, Poles are trying to overpay their loans. According eToro Global Research, 28,5 percent Poles (of those who have financial New Year's resolutions) plan to repay their debt in 2023.

About the author

Paweł Majtkowski - eToro analystPawel 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.

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