Poland Unexpectedly Hikes Rates For The First Time Since 2012 To Tackle Nontransitory Inflation

Poland Unexpectedly Hikes Rates For The First Time Since 2012 To Tackle Nontransitory Inflation

Just a few short hours after the RBNZ hiked New Zealand’s interest rate from 0.25% to 0.50% for the first time since the covid pandemic, in a move that was widely expected (there was no single case of covid to derail this particular rate hike)…

… an actual surprise came out of Poland whose central banks unexpectedly raised interest rates by 40 basis points, caving in to pressure to act against surging inflation that has already prompted nearby Hungary and the Czech Republic to start tightening monetary policy.  None of the 29 economists surveyed by Bloomberg predicted the increase that pushed the reference rate to 0.5%, compared with inflation at 5.8%

Poland’s first hike since 2012 came a day after central bank Governor Adam Glapinski signaled policy makers were getting close to lifting borrowing costs from their record low, but gave no indication the decision was imminent. It also comes one day after the central banker said Poland would seek to buy 100 tons of gold in 2022.

A closer look at the statement reveals that the decision appears to have been somewhat chaotic and while it said that it was prompted by the attempt to ease inflation to its target in the medium term, the statement did not specify if the rate rise was the start of a tightening cycle or an one-time increase.

Unlike the Fed, at least Poland had the guts to inflation appears to no longer be transitory, and instead “may remain elevated longer than expected.”

“Amid probable further economic recovery and favorable labor market conditions, inflation may remain elevated longer than hitherto expected”

“Even though the impact of some supply-side factors currently increasing inflation will fade next year, the rise in global prices of both energy and agricultural commodities observed in recent months may still increase price growth in the coming quarters”

Bloomberg notes that the statement also omitted previous a sentence that said the central bank will continue its bond-buying program.

Tyler Durden
Wed, 10/06/2021 – 11:00

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