Interest rates in Poland – how high will interest rates go? PKO BP forecast, ING Bank Śląski, mBank

During its March meeting, the Monetary Policy Council (MPC) decided to raise the benchmark interest rate for the sixth time in a row – by 75 basis points to 3.50 percent. This is the highest level since February 2013.

MPC decisions have an impact on WIBOR (three months, six months), which at the same time translates into loan installments.

Economists at PKO BP assume that the MPC will raise interest rates by another 125 basis points to 4.75 percent, previously 4.50 percent.

“In the base scenario, we assume that the MPC will raise NBP rates by another 125 basis points and that the reference rate will reach a cycle peak at 4.75%. However, we see a significant amount of uncertainty for this scenario, with the potential to end the cycle at a level Much higher. The board will have to take into account many, often contradictory factors “- he wrote in the quarterly report.

“First, inflation is on the rise. In its March forecast, NBP has significantly revised the trajectory of CPI inflation for the coming years (10.8% in 2022, 9.0% in 2023 and 4.2% in 2024). Those prices in the energy and agricultural markets will peak in The second quarter of 2022, but it does not take into account the possible extension of the anti-inflationary shield until the end of the year (labor market), but it will not limit the volume of increases in world prices for raw materials and foodstuffs ” – added.

This Friday, we will see the preliminary data of the Central Bureau of Statistics on the Consumer Price Index in March of this year. in Poland.

Moreover, PKO BP economists have pointed to the increased risk of a marked economic slowdown, which could discourage the MPC from a significant scope for rate hikes. “An increase in energy costs, a sudden rise in uncertainty and already implemented hikes in interest rates may stifle consumption and reduce investment already surprisingly in the second quarter of 2022, which could significantly reduce the desire to continue the price-raising cycle. We see the potential for a deeper drop in core inflation than NBP would suggest over the long term” – it was written.

Economists from ING Bank Śląski point to a higher range of possible increases in the reference rate, in the range of 5-10%, for several weeks. In a Twitter feed series on Wednesday, they explained where that range came from.

“The broad range is due to war uncertainty, but we have also been saying for some time that the decade of low inflation and rates is over. Our point forecasts assume an increase in rates to 6.5% in 2022 and 7.5% in 2023 ”- wrote ING Śląski Bank economists.

They noted that US rates may rise above those current market prices. “If the Fed could end up rising with interest rates, and today’s currency wars were a struggle to strengthen them (unlike Lehman), then the NBP could not only talk but must act. Especially as the Hungarian bank announces big increases, the Czechs are back To announce an interest rate hike in 2023 ”- it was written.

ING Bank Śląski economists take into account “NBP announcements about hawkish stance, CPI and price targeting”. “An analysis of the NBP interaction function shows that if the current MPC bias is similar to the 2010-16 bias (which has been historically moderate), the rate should be 7.5%.” – They pointed out.

They added: “We assume fiscal easing in Poland in 2022-23, because the EU will extend the suspension of fiscal rules. Strong fiscal easing and monetary tightening raise significant concerns about long-term inflation.”

MBank economists do not agree with the expectations of ING Bank Śląski representatives. “In our opinion, we will stop at much lower rates, and in 2023 there will be no more increases. In the current conditions, there is little prospect for a demand-driven economy. Inflation that is too high in 2022 will be its enemy in the coming years” – mBank economists wrote, Those who previously predicted that the reference rate NBP may reach the level of 5.0-5.5%.

According to the statements of the Chairman of the National Bank of Poland and Chairman of the Monetary Policy Committee at the same time, Adam Glapinski, this is not the end of the rate hike. – The entire monetary policy council in the new, almost completely new, composition is determined to bring inflation to the target as soon as possible and we will be consistent and strict in this – he said on March 9 of this year. During the press conference, Glapiński described himself as a hawk, standing at the head of the hawks who currently make up the Monetary Policy Council. This term is used to refer to representatives of financial institutions whose priority is to keep inflation low, preferring to keep interest rates at relatively higher levels.

Glapiński . declared it “There will be more increases in the coming months.”. – It is difficult to set the ceiling when prices reach – of course there is a ceiling that will be very unfavorable to the economic situation, the labor market and the borrowers, ie to the banks. So there is such a ceiling, but it is difficult to say what – said the governor of the NBP.

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