There is no Budapest in Warsaw. Hungary raises interest rates again, Poland still threatens
This is the fourth interest rate hike in Hungary. The Hungarian National Bank has been doing this every month since June. This time the main price fell from 1.50% to 1.65%. In total, since June, the benchmark has been raised by a total of 1.05 points.
The reason for the increase? inflation. Hungarian Bank The central government is continuing the process of monetary tightening (in addition to raising interest rates, it has also announced, among other things, a reduction in purchases of treasury bills). It also raised its inflation forecast for 2021 and 2022, by 4.1% respectively. at 4.6-4.7 on an annual basis and 3.1 percent. up to 3.4-3.8 percent
From the announcements by the Hungarian National Bank (NBH), a picture emerges of fears and concerns about inflation expectations. In an August statement following the BNH meeting, it said the global rise in commodity prices in world markets was causing inflation to accelerate across a growing range of industrial goods. . The Hungarian monetary authorities believe that the gradual translation of increases in commodity prices and transport costs will be a determining factor in inflation expectations
– Pekao economists write in their commentary.
The Czech Republic is also expected to raise interest rates soon
Another country in the region, fearing rising inflation and inflation expectations, has already started a cycle of rising interest rates. The Czech Republic has done this twice and is expected to do it again at the September 30 meeting.
So far, the Czechs have raised the main average by 0.5 points in total in two increases. (0.25 to 0.75%), but it is likely that by the end of September it will immediately increase by an additional 0.5 percentage point, to 1.25%. More and more signals are coming from the Czech Central Bank on the need to speed up the process of raising interest rates.
The probability of increasing the main rate in the Czech Republic by 0.5 percent. It would be the highest single level in the country in 24 years.
Glapiński: Do you rate the hikes? It would be the school’s fault
The National Bank of Poland is still hesitant to raise interest rates. Unlike their counterparts in Budapest and Prague, the majority of MPC members do not yet see any reason to tighten monetary policy.
The head of the accommodating group in the Monetary Policy Council is NBP chairman Adam Glapinski, who again told the press conference after the September Monetary Policy Committee meeting that inflation in Poland ( 5.5% in August, the highest in 20 years) due to supply shocks, which is not affected by the monetary policy of the Central Bank. The NBP governor says the rise in inflation is temporary and is not afraid of endless inflation expectations or a wage-price vortex.
We have no tools to counter rising prices for electricity, fuel, raw materials and global freight. If we had, we would have used it right away. But we have to rule the whole world. I’m not saying the world wouldn’t be a better place. I assure you that if the NBP Council and the Monetary Policy Council were to rule the world, we would live in a much better world.
– said Glapiński. He spoke in a very strong, even confrontational, way about the idea of raising interest rates.
The central bank should not react to negative supply shocks by raising interest rates. It would be a school mistake to stifle economic growth. Those who encourage higher interest rates are pushing us into stagflation. I don’t know where these ideas come from. They are accepted at the level of ordinary people, but not at the level of people who have studied economics. I cannot imagine that someone, for example, a graduate of the Warsaw School of Economics, could say such nonsense. Criticize everything in it, it can only be a lack of reason or bad will
– The head of the NBP commented.
It’s just that not everyone sees it the same way as Glapinsky and most MPC members. In recent days, economists at PKO Bank Polski have published an analysis showing that despite everything, factors that can be influenced by monetary policy are playing an increasingly important role in Polish inflation.
In the NBP story, regulatory factors and an increase in energy prices account for half of the current high CPI inflation (5.5% yoy). Our measure shows a clear trend in internal inflation and does not support such conclusions
– PKO BP economists write in their commentary.
In contrast, economists at Pekao Bank note that it may be interesting to track the effects of rising interest rates in Hungary as the post-pandemic economic situation in that country and in Poland is similar in many areas.
First, both countries suffer from high inflation rates. In August, consumer prices in Hungary rose 4.9%. On an annual basis, and in Poland by 5.5 percent. Second, the GDPs of both countries have returned to pre-pandemic levels, and they are at the forefront of the European Union for the fastest economic recovery. Third, Hungary and Poland are characterized by lower unemployment levels than other EU countries (the unemployment rate in the LFS in August was 4.3% and 3.4%, respectively). Against the background of these similarities, the ratings of the NBH and NBP differ significantly in terms of inflation expectations and monetary policy response.
– Write in their comment. They also add that the future will show whether the NBP is late in the monetary tightening cycle, or whether the decisions of the Hungarian and Czech central banks are premature.