Poland’s central bank has unexpectedly raised interest rates for the first time in almost a decade, amid a surge in inflation in the central European nation.
The 40 basis point increase – the first rise by the National Bank of Poland (NBP) since 2012 – lifted the country’s benchmark rate to 0.5 per cent and sent the zloty up more than 1 per cent against the euro.
The move, which follows interest rate rises in other central European nations, including the Czech Republic, Hungary and Romania, comes as year-on-year inflation in Poland hit 5.8 per cent in September — its highest rate for 20 years.
Yet despite the mounting inflationary pressures, most economists had not expected the central bank, which has been one of the more dovish in central Europe, to act so soon. Of 29 economists polled by Bloomberg, not one had forecast the increase.
“Consensus was that the first rate hike would be delivered in November,” said Piotr Bujak, chief economist at PKO BP, Poland’s biggest bank.
The NBP said in a statement that the factors driving inflation in Poland were largely beyond the control of domestic monetary policy, such as global energy and agricultural prices, and disruptions in supply chains.
However, it added that it had decided to take action because although some of these factors would fade next year, others, such as the pressure from agricultural and energy prices, would remain, and in conjunction with the post-pandemic economic rebound, this meant inflation could remain “elevated longer than hitherto expected”.
The NBP said that it could also intervene in foreign exchange markets, but did not make clear whether further interest rate rises could follow.
Bujak said that while Wednesday’s move was “enough to be noticed by the public, and will definitely affect inflation expectations”, further moves were likely to be needed to tame inflation.
“It seems that [the NBP] may deliver an additional hike in November. The question is by how much: 10, 25, 50 basis points? And then may be it will be enough for some time: then . . . it is likely that they will want to adopt a wait-and-see approach,” he said.
Liam Peach, an economist at Capital Economics, predicted a more sustained increase, but conceded that there was “a lot of uncertainty about where the dovish members on the [monetary policy council] currently stand”.
“We’ve pencilled in the policy rate rising to 2 per cent next year but we’ll be looking closely at the comments from policymakers over the coming weeks to assess whether there is appetite for such aggressive tightening,” he wrote.
Source: Economy - ft.com
