Interest rates highest since 2004 after 10th increase in a row

At the previous session in June, the Monetary Policy Council decided to increase all interest rates by 75 basis points. The main referene rate was raised at the time from 5.25% to 6.00%.

The first increase in interest rates in this series took place in October, 2021. Since then, the Monetary Policy Council has been raising the rates every month.

On Thursday (July 7), the Monetary Policy Council decided to increase the NBP interest rates yet again, this time by 0.50 percentage points. This has been a 10th interest rates increase in a row. The main reference rate has been raised from 6.00% to 6.50%, which is the highest level since 2004.

"The Council assessed, that there persists a risk of inflation running above the NBP inflation target in the monetary policy transmission horizon. In order to reduce this risk, i.e. striving to decrease inflation to the NBP target in the medium term, the Council decided to increase NBP interest rates again," we read in a statement released by the Council after Thursday's session.

"The increase of the NBP interest rates will also curb inflation expectations," the statement reads.

According to the Council, "global inflation continues to rise, reaching in many economies the highest levels in decades".

"At the same time, inflation forecasts for the coming quarters are being significantly revised upwards. The main source of growing inflation continue to be high commodity prices as well as prolonged disruptions in global supply chains and international transport, amplified by the effects of war. In some economies, rising prices are also driven by high demand growth and increasing labour costs. As a consequence, core inflation is also increasing," we read.

The Council set the NBP interest rates at the following levels:

- reference rate at 6.50% on an annual basis;

- lombard rate at 7.00% on an annual basis;

- deposit rate at 6.00% on an annual basis;

- rediscount rate at 6.55% on an annual basis;

- discount rate on bills of exchange at 6.60% on an annual basis;

The resolution of the Monetary Policy Council shall enter into force on 8 July 2022.