Another interest rate hike will not be the last

According to Maciej Pieczkowski, Director General of the Inbank Branch in Poland, the increasing inflation leaves the Monetary Policy Council with no choice. Interest rates rose surprisingly strongly once again, and this is certainly not the end. The only mystery is their target height.

"At the April meeting, the Monetary Policy Council raised all interest rates by 100 basis points. Such a harsh reaction is somewhat surprising, but should not be too surprising. Inflation seems to be getting out of control, and the economy should not suffer much from the increase in the cost of money. The reference rate is already 4.5 percent. The amount of the WIBOR rate, which determines the interest rate on loans, before the announcement of the decision on the April rate hike, jumped to 4.9 percent for the three-month term and 5.15 for the six-month term," the expert noted.

March inflation amounted to 10.9 percent. Previously, we dealt with such high growth dynamics in the consumer price index in October 2001, which is over two decades ago. At that time, the reference rate of the National Bank of Poland was 13 percent.

"This list is only symbolic, because currently the Polish economy is at a completely different level of development, and the sources of inflation are extraordinary and largely beyond the influence of monetary policy tools. Nevertheless, the question about the target level of the reference rate in this monetary cycle is it is justified and it is not abstract at all, because this will determine both the interest rate on loans and the interest on deposits placed with banks," Maciej Pieczkowski emphasized.

(WBJ)