Central bank raises interest rates again to tackle galloping inflation

On 8 June 2022 the Monetary Policy Council held a meeting. The Council decided to increase the NBP interest rates by 0.75 percentage points. The Council set the NBP interest rates at the following levels:

reference rate at 6.00% on an annual basis;

lombard rate at 6.50% on an annual basis;

deposit rate at 5.50% on an annual basis;

rediscount rate at 6.05% on an annual basis;

discount rate on bills of exchange at 6.10% on an annual basis;

The resolution of the Monetary Policy Council shall enter into force on 9 June 2022.

"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," the Monetary Policy Council (MPC) said in a statement issued on Wednesday (June 8).

"Inflation in Poland – according to Statistics Poland flash estimate – increased in May 2022 to 13.9% y/y," we read.

"In the coming quarters, it is expected that the impact of factors currently amplifying price growth will persist, including those related to the Russian military aggression against Ukraine. Meanwhile, the NBP interest rates increases, together with fading of the impact of shocks currently boosting prices will contribute to a gradual fall in inflation in the coming years. The decrease in inflation should also be supported by appreciation of zloty exchange rate, which, in the Council’s assessment, will be consistent with the fundamentals of the Polish economy," the MPC said.

The Council also 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. The increase of the NBP interest rates will also curb inflation expectations," the Council underscored.