Polish central bank raises rates by greater-than-expected 100 bp

Rate-setters in Warsaw hiked short-term rates by a greater-than-expected 100 basis points following inflation readings that came in an at a more than two decade high.

That left official short-term rates at 4.50%.

The Polish central bank's Monetary Policy Council had been expected to raise rates by 50-75 basis points.

Wednesday's move marked the seventh consecutive meeting at which they had hiked rates, having cited the need to tame surging consumer prices on repeated occasions.

It was also the largest single rate increase in 22 years.

In the wake of the decision, economist Liam Peach at Capital Economics raised their target for the year-end level of interest rates by 100 basis points to 5.75%.

In March, consumer prices in Poland had shot 3.2% higher month-on-month, pushing the annual rate of increase to 10.9%.

Peach believed that the PNB was possibly being too optimistic in its forecasts for "favourable" economic growth in the next few quarters, thanks to its limited exports to Russia.

Nevertheless, while predicting that growth was set to slow "sharply" in the middle of 2022, he thought that Poland would be able to dodge a recession.

"Overall, today’s interest rate hike puts to bed any remaining doubts about the NBP’s intentions to bring inflation back to its target.

"In our view, the tightening cycle still has some way to go and today’s decision opens the door for rates to rise further in this cycle than had previously seemed likely."