On Thursday, July 7, the next meeting of the Monetary Policy Council will be held. And it will almost for sure be bad news fro borrowers in Poland, because the tenth rate hike in a row is actually certain, but it’s scale – oh, a lot can happen here.
6 percent – this is the main NBP interest rate. At the beginning of October, nine increases ago, it was at a record (and exceptionally) low level of 0.10%.
Another blow for borrowers in Poland
On Thursday, July 7, the Monetary Policy Council will meet again. The tenth rate hike in a row is actually certain – its absence would be a sensation. Inflation continues to rise – in June it amounted to 15.6 percent according to a quick estimate of the Central Statistical Office. Interest rate hikes seem to be delayed, so they should take into account the expected inflation in a few quarters, not today’s one, but even if president Glapiński suggested that the end of the rate hikes cycle should come only when the current inflation starts to stabilise.
How much will the MPC raise rates on Thursday? It can be safely said that every decision will be recognized by some economists as correct, and by others – as wrong.
Of course, there are many voices. For example, MPC member Ludwik Kotecki said last week in an interview with PAP Biznes that in July interest rates should go up by at least 100 basis points, i.e. 1 percentage point. If the MPC raised the main NBP rate from the current 6% to at least 7%, they would then be the highest in 20 years.
In the 21st century, only once – in April this year. – The MPC ordered a one-off hike of as much as 100 basis points. The Council decided for the last time in August 2000, i.e. almost 22 years ago.
Kotecki said. However, it is worth remembering that Kotecki is “only” one of eight MPC members. Moreover, all the rest – according to the assessments of analytical centres surveyed by PAP at the beginning of June this year. – are less hawkish about monetary policy. In a word – Kotecki’s motion for such a significant rate hike may not be approved by the rest of the MPC.
The pressure that could have been imposed on the MPC by the central banks of Hungary and the Czech Republic also speaks in favour of the high rate hike. At recent meetings, they have ordered very high increases – by 185 basis points and 125 basis points respectively.
Chief economist opposed to a large raise
But there is a completely different view of the situation on the market. For example, the chief economist of PKO Bank Polski, Piotr Bujak, believes that even an interest rate hike by 50 basis points would be “very brave”. Why?
The Polish economy is not receiving such optimistic data as in previous months . Its further inhibition by interest rate increases carries with it more and more risks. The latest example is the disastrous reading of the PMI index for Polish industry – it was only 44.4 , the lowest since the first half of 2020.
And loan instalments are growing
Loan instalments have been growing very fast in recent months. This is the effect of the increase in WIBOR rates (3M and 6M), on which the interest rates on loans are based, and which are rising not only due to the interest rate hikes already ordered by the MPC, but also the fact that the market predicts further ones. WIBOR 3M is currently 7.08%, WIBOR 6M is already 7.38%.
For example, an instalment of a model loan for 25 years for 500.000 PLN incurred in January 2021 (with an interest rate of 2% margin plus WIBOR 3M) is now almost 4 thousand. zloty. For comparison – a year ago it was about 1.900 zloty. Further rate hikes will drive the loan instalments even further.
The effects of tightening the monetary policy by the Monetary Policy Council can also be seen in the data on housing loans. In June, the number of inquiries about them was about 60 percent lower than last year. In June 2022, a total of 19.500 people applied for a housing loan. potential borrowers. This is the lowest number in the history of the Credit Information Bureau analysis (i.e. since January 2007).
The creditworthiness in Poland has changed a lot. According to calculations by Jarosław Sadowski from Expander Advisors, an example pair with an income of up to 6,000 PLN net still in September 2021, the person could count on 550,000 PLN loan.
In June, the available loan amount was only PLN 280,000. PLN, after the July rate hike, it will drop even further (to about PLN 260-275000, depending on the scale of the rate hike).