Interest rates. January 2022. What is the decision of the MPC. Forecasts

The Monetary Policy Council will decide on the interest rates on Tuesday. Analysts expect the fourth increase in a row, which will mean the need to pay a higher installment for borrowers.

The day before Christmas Eve, the National Bank of Poland informed in a statement that the next one-day decision-making meeting of the Monetary Policy Council was postponed to Tuesday, January 4, 2022, from January 12. This means that the decision on interest rates will be made before the December inflation data, which will be released by the Central Statistical Office on Friday. Economists expect a further increase in inflation, forecasts say that prices will rise by 8.3%, compared to 7.8%. in November.

MPC members on rate hikes

In order to fight inflation, the MPC may decide to raise interest rates for the fourth time in a row. Analysts expect the main reference rate to be raised by at least 50 basis points (currently 1.75%).

An MPC member, Eugeniusz Gatnar, also mentioned a rate hike of this scale in an interview with PAP Biznes. – An interest rate hike by 50 basis points at the January meeting will be appropriate if the current forecasts that inflation in December will amount to approx. 8-8.5% are confirmed, although the quick reading of the CSO for December will not be known yet. I do not rule out the necessity to raise by 75 bp, if we did not see the prospects that the anti-inflation shield could bring the assumed results, and according to forecasts that the NBP DAE should provide us, the CPI index will break the psychological barrier of 10% in Q1 2022. I believe that larger-scale movements in rates may give the impression that the Council is catching up time and chasing inflation, Gatnar said in an interview published on December 29.

A similar opinion was expressed on December 20 by another MPC member, Łukasz Hardt. – Of course, the rates went up strongly, and we will probably expect another hike in January. (…) In my opinion there is a very likely repeat, ie 50 basis points, 0.5 percentage point of the rate up in January, but unfortunately it will probably not be the last move up yet. (…) I think there will be a few more steps ahead of the MPC – Hardt said on TV in Poland.

Interest rate increases

The Monetary Policy Council raised interest rates at the last three meetings. The main reference interest rate was raised by the MPC by 40 bp in October, by 75 bp in November and by 50 bp in December – by 165 bp in total to 1.75%.

In the analysis presented before Christmas, the economists of PKO BP estimated that in response to increased inflation, the MPC would raise rates to 3.5%, and the increases would be cumulative in the first half of 2022.

“We predict that the MPC will continue to increase interest rates, and the reference rate will reach 3.5% in 2022. Interest rate increases will take place during a smooth change in the composition of the Council. that a move by (at least) 50 bp in January is almost certain “- wrote economists from PKO BP.

“We expect another rate hike in February, although it will be an unusual meeting, without new inflation data. The MPC will have more substantive arguments in the form of data, as well as the updated inflation projection, in March” – they added.

Also Goldman Sachs predicts that at the next meeting the Monetary Policy Council will raise interest rates by 50 basis points to 2.25%, because – as it was assessed – the economic environment still favors a hawkish attitude in monetary policy.

After the URE announced new, higher than expected electricity and gas tariffs, some economists pointed out that the reference rate may increase in 2022 up to 4 percent

NBP reference ratePAP / Maciej Zieliński

New NBP inflation forecast

He recently spoke about the inflation forecast for 2022 President of the National Bank of Poland Adam Glapiński. “The above factors mean that the average annual CPI (consumer price index – ed.) In 2022 will amount to 7.6%, which is more than the projected 5.1% in 2021. The maximum level of CPI inflation will be took place in June 2022 (8.3%), and then it will gradually decrease – to 6.2% in December 2022 “- wrote the President of the National Bank of Poland Adam Glapiński, quoted by Business Insider.

On Wednesday, that is after the MPC decision, President Adam Glapiński will speak at the traditional press conference devoted to the assessment of the current economic situation in Poland. One can expect commentary to the Tuesday’s MPC decision, as well as questions about future MPC decisions on interest rates.

Inflation according to GUS

On Friday, the Central Statistical Office will publish the first calculation of consumer inflation (CPI) in December. In November, the price growth rate once again proved to be higher than economists’ expectations. The CSO initially calculated the pace of price growth at 7.7%, and in the final calculation it corrected the data to 7.8%. Meanwhile, economists surveyed by PAP Biznes expected inflation at 7.4 percent.

“The outlook for inflation remains unfavorable. The anti-inflationary shield, which, among other things, reduces VAT on electricity, gas and fuels, will not prevent inflation from rising further. The new gas and energy tariffs approved by the Energy Regulatory Office assume such drastic increases that it is necessary there is a revision of the inflation scenario. Assuming that the anti-inflation shield expires as agreed so far (March / May), the inflation peak in Poland will be achieved in the middle of next year at over 9% y / y “- they wrote in the analysis published in the second half of December Bank Millennium economists.

“In our scenario, we assume that the anti-inflation shield will also be extended in the second quarter of 2022, which will shift the peak of inflation to the summer months. In our opinion, the average annual inflation will increase to around 7.3% in 2022 compared to 6.5%. The space for an increase in inflation in 2022 may be reduced by the temporary reduction of VAT on food announced by the government, although due to the general nature of the information it is difficult to estimate its impact “- they added.

Inflation in PolandPAP / Maciej Zieliński

Main photo source: Wojciech Olkuśnik / PAP

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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