Poland Monetary Policy May 2022

At its meeting on 5 May, the National Bank of Poland (NBP) raised the reference rate by 75 basis points from 4.50% to 5.25%, marking the eighth consecutive rate hike since it began its tightening cycle in October 2021. The NBP also raised the Lombard rate to 5.75%, the rediscount rate to 5.30% and the deposit rate to 4.75%—from 5.00%, 4.55% and 4.00%, respectively.

The NBP’s decision came amid soaring price pressures, with inflation hitting an almost 24-year high of 12.3% in April as food price inflation increased due to the war in Ukraine and amid high energy prices. The Central Bank now sees inflation remaining markedly elevated in the coming quarters. As such, the NBP decided to hike rates to reduce the risk of inflation staying above its 1.5–3.5% target band over the monetary policy horizon.

In its communiqué, the NBP stated that “further decisions of the Council will depend on incoming information regarding perspectives for inflation and economic activity, including the impact of the Russian military aggression against Ukraine on the Polish economy”. As such, the majority of our panelists see further rate increases this year.

Commenting on the release, economists at ING stated:

“Today’s press conference and our own CPI projections support our view on the target NBP rate of 8.5% rather than 7.5% as we communicated until recently. […] The NBP rhetoric remains very hawkish. For the first time for many months the NBP Governor admitted that inflation expectations are a source of concern. This means concerns about […] second-round effects. Interest rate hikes will be continued through end-2022. This means that the target rate of 8.5% may be reached even before the year end.”

The next monetary meeting is scheduled for 8 June.

FocusEconomics analysts see the reference rate ending 2022 at 4.00% and 2023 at 3.60%.