Interest rates up, investment owners are still in a huge downside

At the meeting accelerated by one week, the Monetary Policy Council made a decision on raising interest rates in Poland by 50 points. This means that primary interest rate is now 2,25 percent. The real interest rate is currently -6,05 percent, which is the average amount that is currently lost on a bank deposit.

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.

Thus, the MPC continues with a series of hikes started in October 2021. Since then, rates have been raised every month at subsequent meetings, and the current rate hike is the fourth in a row. In total, the rates were raised from 0,1 percent. up to 2,25 percent

The fight against inflation continues

The primary motive for action RPP is to counteract high inflation that continues to rise despite previous interest rate increases. In November, inflation amounted to 7,8%, in December it is estimated at around 8,2%. According to forecasts NBP, the peak of inflation with a reading of 8,3 percent. is to take place in June, and inflation at the end of 2022 is expected to amount to 6,2 percent. However, these forecasts are very cautious and it cannot be ruled out that inflation in 2022 will reach double-digit levels.

It is worth remembering that the difference between the official interest rates and inflation remains large. Hence, the negative interest rate in the economy is high. If we subtract the peak inflation forecast currently forecast by the NBP (2,25%) from the current level of interest rates (8,3%), we will get a real interest rate of -6,05%. This is what its owner is currently losing on average in a bank deposit. People who keep money at home lose even more, because the entire value of inflation.

It is not only Polish specificity, and a similar phenomenon has been observed all over the world for a decade. Calculated, analogically to the Polish one, the real rate in the European Union is currently -5%, in Great Britain -5,5%, and in the USA -6,5%.

The NBP did not say the last word

In the coming months, we can expect further rate hikes in Poland, we predict that the basic interest rate at the end of 2022 will be 4 percent. This year we can also expect interest rates to be incurred by FED, we expect the first increase in June 2022.