Inflation the highest in 20 years. Will there be an increase in interest rates?

We have the infamous record! Inflation

in Poland is the highest in 20 years and in August it reached 5.4%. The last time prices rose so fast was in June 2001. Sponsored Sponsored

The Monetary Policy Council’s response may be to raise interest rates, which have been at a minimal level since the beginning of the pandemic. If that happens, today’s inexpensive loan installments could quickly increase by several hundred zlotys.

The highest inflation in 20 years

Just a month ago we reported on BeInCrypto Poland that in July the annual inflation

rate was 5%. This was the highest value in 10 years. What’s more, experts expected it to rise further. Sponsored Sponsored

This has also happened and according to

the

latest data

from the Central Statistical Office, the inflation rate in August is already 5.4% year-on-year. The last time prices grew so fast was in June 2021, so today we have the highest inflation in over 20 years. Inflation the highest in 20 years. Will there be an increase in interest rates?Inflacja w Polsce na przełomie 20 lat Inflationin Poland / Source: stat.gov.pl

The increase in inflation is caused by rising prices of goods and services. The Central Statistical Office states that the most expensive are fuels, which cost 28% more than a year ago. Even compared to the previous month (July), their prices increased by 1.8%. Furthermore, energy costs increased by 6.1%, which was mainly due to the official increase in gas prices.

Another factor that accelerates inflation is the COVID-19 pandemic-induced large-scale money printing. The money supply (M2) has increased by PLN 318 billion or 20% since February 2020. This means that in about 1.5 years, the amount of money in circulation increased by 1/5. During that time, the economy grew by only 1.7%. So money has grown more than ten times more than the available goods and services.

Interest rates up?

One of the reactions to the pandemic crisis was a reduction in interest rates by the Monetary Policy Council (MPC). This strongly reduced the price of credit and encouraged consumers to take out loans. At the same time keeping cash – either at home or in a bank deposit – was unprofitable.

Inflation the highest in 20 years. Will there be an increase in interest rates?Inflation the highest in 20 years. Will there be an increase in interest rates? Main interest rates in Poland / Source: www.nbp.pl

In the face of record inflation, experts signal that this year may bring

to raise interest rates. For example, one of the MPC members, Łukasz Hardt, has already announced that he will vote for an increase in interest rates to mitigate the negative effects of inflation. If this happens, borrowers’ instalments could jump by up to several hundred zloty a month.

Cryptocurrency educator and influencer @PhilKonieczny, with his usual sense of humor, commented on the announcement of raising interest rates. He stated that he was “as shocked as the government’s advisors”, and that such a scenario was “unforeseeable”.

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