MPC raises interest rates, but that is not end of bad news
22:11
The Monetary Policy Council increased its rates by 75 basis points at its May meeting. The main NBP rate thus rose to 5,25 percent, which is less than expected by economists. But it is not the end of the increase, which for borrowers means rather bad information.
This is a surprisingly small increase because the market was convinced that the rates would rise by 100 basis points. According to most economists, MPC would thus respond to the surprising increase in inflation in April. Inflation in Poland in April was 12,3 percent, the most since 1998.
Finally, however, MPC representatives did not decide on a second increase of 100 basis points in a row. Mateusz Urban, economist of Oxford Economics, estimates that concerns about the deterioration of borrowers could have been put to the test. However, in the communication that the Council published after the meeting, the arguments put forward are almost exactly the same as a month earlier when the rate increase was 100 basis points. This is something that the economists of the mBank are paying attention to.
After the May decision, the main NBP rate, or reference rate, has been at the highest level since November 2008. At that time, it was 5,75 percent, but it is clear that the May Council’s decision does not complete the increase cycle and before us the subsequent months in which MPC will have to make similar decisions. For borrowers, a vision where the NBP's reference rate is rising to 7 percent is a major problem. Especially for those who have taken credit during a pandemic at rates close to zero. In such cases, the installments of their loans are already 80 percent higher than the contract date.
