A series of hikes by Poland’s Monetary Policy Council (RPP) will boost the interest rate to 3.5 percent in July, a leading economic think-tank has predicted.
On Tuesday, the RPP raised the reference interest rate by 50 basis points to 2.25 percent. It is the fourth rate hike in a row.
According to the Polish Economic Institute (PIE), recent hikes in electricity and gas prices in Poland will affect the target level of interest rates in the country. “We foresee that the RPP will raise the reference rate to 3.5 percent in July 2022,” said PIE.
It noted that usually central banks should not react to shocks on the commodity markets with rate hikes, however, this time rising energy prices have driven up inflation expectations.
PIE also sees the stabilisation of the Polish zloty as a key challenge for monetary policy makers in 2022. “The weakening of the Polish zloty may lead to investments shrinking. Data released by Poland’s central bank (NBP) indicate that the exchange rate is currently close to the limit of profitability,” PIE warned.