Flash comment: A surprisingly large Polish rate hike

Danske Research Team Danske Bank A/S

The Polish central bank surprised us and other analysts by hiking rates (main rate from 0.1% to 0.4% and Lombard rate from 0.5% to 1%) and also raised remuneration of reserve requirements from 0.5% to 2%. The size of the rate hike was surprisingly large.

The monetary policy statement indicated that the central bank sees inflation more persistent warranting the policy adjustment, but they kept dovish language on the need for FX interventions. We are not convinced that the central bank has turned sufficiently hawkish.

Hence, we are sceptical that the move will initiate a permanent move lower in EUR/PLN also as external headwinds from a slowing global manufacturing sector and stronger USD will weigh on the currency. However, near-term we may see a bit more Zloty strength.

The central bank today decided to raise its interest rate amid excessively high inflation. They both raised the Lombard rate and the benchmark rate as well as the rate on reserve requirements. Today’s move was not exp ected by market analy sts (or us) as most of the committee members had stressed that they wanted to await the new macro projections in November. The rate hike was also surprising given that central bank had said that Poland should be more or less out of the COVID-19 crisis before hiking rates–in recent weeks, the country had seen rising COVID-19 infections.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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