Poland reverses monetary policy course

Yesterday, the Polish central bank abruptly reversed course and raised its policy rate by 40bps, taking it to 0.5%. Poland was the last to begin the rate hiking cycle in the region, with Hungary, the Czech Republic and Russia all beginning the normalization process earlier this year on rising inflation. With September’s CPI at 5.8%, Poland’s real interest rate was the most negative in EM. We believe this is a good development for the economy, as growth has turned positive, covid vaccination levels are >50%, and the unemployment rate is back down to 3.4%. It was time to begin monetary policy normalization.