Weak zloty may mean a higher interest rate hike

According to Paweł Majtkowski, an eToro market analyst in Poland, the zloty remains record weak and records levels close to long-term lows, because due to the situation in Ukraine, capital flows out to markets perceived as safer.

"It is possible that the NBP will decide to raise rates higher, as it may be a more effective way to strengthen the zloty than temporary interventions. As a result of the Russian invasion, the Ukrainian hryvnia has lost less than the Russian ruble. On Tuesday, the NBP intervened for the first time in 10 years. on the currency market to strengthen the zloty. The zloty exchange rate against the dollar reached PLN 4.33 and was the highest in 21 years, the exchange rate against the euro exceeded PLN 4.80 and was close to the historical record of the weakness of the zloty in 2009. The intervention had only a temporary effect," the analyst said.

In his opinion, the Monetary Policy Council may decide on a higher rate hike.

"This could have an impact, more effectively than temporary interventions, on the strengthening of the zloty. The weak zloty makes it difficult to lower inflation. All the more so as the current weakness of the Polish currency is also the effect of the earlier actions of the National Bank of Poland, which supported the weakening of the zloty in the past. We entered the war when the zloty exchange rate was PLN 4.50 for €1, which is well above the long-term average," Paweł Majtkowski added.

(WBJ)