Monetary Policy Council raises interest rates again to tackle huge inflation

On 6 April 2022 the Monetary Policy Council held a meeting. The Council decided to increase the NBP interest rates by 1.00 percentage points.

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

reference rate at 4.50% on an annual basis;

lombard rate at 5.00% on an annual basis;

deposit rate at 4.00% on an annual basis;

rediscount rate at 4.55% on an annual basis;

discount rate on bills of exchange at 4.60% on an annual basis;

The resolution of the Monetary Policy Council shall enter into force on 7 April 2022.

"Inflation in Poland – according to Statistics Poland flash estimate – increased in March 2022 to 10.9% which was mainly driven by a strong growth in the prices of fuels and other energy carriers, amid Russian military aggression against Ukraine. Earlier significant rise in energy and agricultural commodity prices and increases in regulated tariffs on electricity, natural gas and thermal energy have continued to contribute to markedly elevated inflation. At the same time, the ongoing economic recovery, including an increase in demand driven by rising household incomes, has had also a positive contribution to the price growth. In turn, a curbing impact on inflation has been exerted by a reduction in some tax rates as part of the Anti-inflationary Shield," the Council said in a statement issued after Wednesday's session.

"In 2022, inflation will remain markedly elevated, which – apart from factors previously amplifying inflation – will be due to the economic consequences of the Russian aggression against Ukraine. In the coming years, together with fading of the impact of shocks currently boosting prices, inflation will decrease. 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," we read.

The Council added "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".