Poland’s central bank unexpectedly raised interest rates for the first time in nearly a decade, amid soaring inflation in the central European country.
The 40 basis point increase – the first hike by the National Bank of Poland (NBP) since 2012 – raised the country’s benchmark rate to 0.5% and pushed the zloty up more than 1% against the euro.
The move, which follows interest rate hikes in other central European countries including the Czech Republic, Hungary and Romania, comes as inflation in Poland hit 5.8% in September, its highest level in 20 years.
Yet despite mounting inflationary pressures, most economists did not expect the central bank, which has been one of the most accommodating in Central Europe, to act so soon. Of 29 economists surveyed by Bloomberg, none had predicted the increase.
“The consensus was that the first rate hike would be pronounced in November,” said Piotr Bujak, chief economist at PKO BP, Poland’s largest bank.
The NBP said in a statement that factors driving inflation in Poland were largely outside the control of national monetary policy, such as global energy and agricultural prices, and disruptions in the economy. supply chains.
However, he added that he decided to act because while some of these factors would subside next year, others, such as agricultural and energy price pressure, would persist, and in conjunction with the post economic rebound. -pandemic, this meant inflation could stay “high longer than expected”.
The NBP said it could intervene in foreign exchange markets as well, but did not say if further interest rate hikes could follow.
Bujak said that if Wednesday’s decision was “enough to be noticed by the public and will certainly affect inflation expectations,” other measures would likely be needed to bring inflation under control.
“It seems that [the NBP] may offer an additional hike in November. The question is how much: 10, 25, 50 basis points? And then maybe that will be enough for a while: then. . . they are likely to want to take a wait-and-see approach, âhe said.
Liam Peach, an economist at Capital Economics, predicted a more sustained increase, but admitted that there was “a lot of uncertainty as to where the accommodating members on the [monetary policy council] currently standing â.
“We have plans to raise the policy rate to 2% next year, but we will be taking a close look at comments from policymakers over the next few weeks to assess whether there is an appetite for such aggressive tightening,” a- he writes.