Interest rates. Further increases are inevitable

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It is not known why the MPC session was accelerated, since it was January interest rate increases they were so low. The situation of the MPC and the NBP becomes more and more difficult. CPI inflation accelerated to 8.6 percent in December. This is the sixth month in a row that it is growing. The price growth rate is the highest in 21 years. Higher CPI inflation was last recorded in November 2000, when it reached 9.3%.

Inflation is rising faster than analysts predicted. The market consensus predicted a result of 8.3% in December. Inflation for the sixth time in a row turned out to be higher than expected by analysts.

– Now we have a nervous situation, on the one hand the MPC would like to do something about the rising inflation, but on the other hand it is afraid that it will do too much and slow down the Polish economy – says Dr. Przemysław Kwiecień, chief economist of XTB, in an interview with MarketNews24. – The MPC is in an uncomfortable situation and accelerating its meeting by a week did not change anything.

Central banks should make decisions gradually, changing interest rates in cycles. Reductions and raises should be spread over many months. Also for this reason, to react to incoming information.

Just before the Central Statistical Office’s communiqué on preliminary inflation data in December, the president of the NBP at the press conference after the MPC meeting, he stated that will certainly recommend one more rate hikeprobably by 50 points. baseline, as it happened in early January. The eight-day acceleration of the MPC meeting made many analysts wonder whether a higher interest rate hike would be announced. However, this did not happen.

– Despite the January interest rate hike, inflation is over 6 percentage points. percent higher than the basic NBP interest rate, so at the beginning of January it was worth considering whether this increase should be higher – adds the XTB expert. – The effect is that more raises will be needed in the following months. What is also important, the market expectations for rate hikes after the January MPC meeting did not drop, now the market already assumes that the basic interest rate will increase to at least 4%.

The peak of inflation is also still ahead of us. Recently, the NBP estimated that it would happen in January 2022, now such predictions concern the end of the first half of the year.

– It is not known when this will happen, because the effects of the increases are very noticeable for the society, and the government, for image reasons, is taking various actions to postpone subsequent price increases – assesses P.Kwiecień.

The fight to control inflation becomes more and more difficult. The external situation is unfavorable due to increases in energy commodity prices in Europe, reinforced by the Russian gas supply policy and rising prices of contracts for CO2 emissions, the ETS system is flawed, and the actions of the Polish government to have it changed are right. However, inflation is also influenced by internal factors, attempts to contain price increases were made too late.

– The situation is particularly dangerous when we get used to the fact that everything is more expensive, because high inflation expectations may prove to be the most difficult to overcome – explains the XTB expert.

About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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