The National Bank of Poland delivered a massive 100bp hike in its reference rate on April 6 in a surprising acceleration of the tightening cycle, as it seeks to quash double-digit growth of consumer prices.

The reference interest rate is now at 4.5%, the highest level since late 2012, while the hike itself was the strongest since 1999 and surprised the market, which expected a move up of 50bp-75bp.

“The NBP is clearly shrugging off any concerns about any hit to activity on the back of the war in Ukraine and focusing its efforts on tackling inflation,” Capital Economics said in a comment.

“Although the Polish zloty has rebounded from its lows at the start of March, which prompted a 75bp hike and FX intervention by the NBP last month, the latest inflation data have made for uncomfortable reading as consumer prices surged 3.2% m/m and 10.9% y/y in March,” the London-based consultancy said.

The NBP refrained from offering much reasoning behind the unexpectedly sharp hike, reiterating the points about the ongoing inflation bout that have been clear for some time.

“Inflation in Poland … increased in March 2022 to 10.9% [y/y], which was mainly driven by a strong growth in the prices of fuels and other energy carriers, amid Russian military aggression against Ukraine,” the NBP said.

“Earlier significant rise in energy and agricultural commodity prices and increases in regulated tariffs on electricity, natural gas and thermal energy have continued to contribute to markedly elevated inflation,” the central bank added.

The upcoming press conference of NBP’s Governor Adam Glapinski could offer some clarity on why the central bank decided to increase the scale of the tightening. 

“Assessments of factors determining inflation and its further path remained unchanged compared to the March communiqué,” Poland’s state-controlled bank PKO BP said, adding that the NBP also maintained its positive outlook of economic growth.

“If the reasoning was not to reach the target rate faster, then the market should start pricing in rates above 6%,” PKO BP said.