MPC raises interest rates significantly
16:13
The Monetary Policy Council (MPC) raised the reference rate to 1.25% from 0.5%, the central bank reported. The market consensus predicted an increase in the reference rate by 50 bp.
From 4 November 2021, the reference rate will therefore amount to 1.25% on an annual basis. The lombard rate will amount to 1.75% on an annual basis, the deposit rate to 0.75% on an annual basis, while the rediscount rate will increase to 1.30% on an annual basis. Finally, the discount rate for bills of exchange is raised to 1.35% on an annual basis.
"This is a reaction to current and future inflation risks, the new NBP projection will show CPI beyond the target even in 2023. The governor's comments will be mild, but the end of the cycle is far, 2.5% or higher. Real rates are still the lowest historically, but also in the region,” ING analysts commented.
"We are almost at the pre-pandemic level. Meanwhile, supply shocks are slowly fading away and the game is about anchoring inflation expectations and reducing the scale of second-round effects," Wojciech Matysiak, PKO BP economist, said.
The bank shares reacted to the decision with an increase. The WIG-Banks index, just before the announcement of the rate hike, fell by 0.73 percent. Immediately after the announcement, it jumped 1.24 percent above the dash, because the decision means that banks will record a higher interest margin faster.
