The National Bank of Poland (NBP) raised its reference rate by 50bp to 2.75% on February 8 in the fifth consecutive increase since October.

The increase is aimed at curbing inflation, which has been growing steadily since February and reached 8.6% y/y in December.

The NBP is likely to continue with the current tightening streak. Analysts pencil in the hikes reaching 4%-4.5% in the second half of 2022 before stabilising to ensure economic growth is not stifled.

“Decisions … in the coming months will continue to be aimed at reducing inflation to a level consistent with the NBP inflation target in the medium term,” the NBP said in a statement.

The central bank added that the tightening would go on “while taking into account economic conditions, so as to ensure medium-term price stability and at the same time support sustainable economic growth after the global pandemic shock”.

Poland’s inflation is expected to ease somewhat in the coming months due to cuts to VAT on energy, fuel and food although the cuts were implemented temporarily and will delay an inflation peak, analysts say.

Poland also runs the risk of wage-price spiral this year that will add extra difficulty in containing surging inflation, Capital Economics notes.

“Nominal wage growth surged to a decade-high of 11.2% y/y in December in large part due to the red-hot labour market as the unemployment fell to its pre-pandemic low of 2.9% in December, far below its natural rate of 4.5-5%. These developments have become an increasing cause for concern,” Capital Economics said.

The NBP chief Adam Glapinski is expected today to offer more details on the rationale of the most recent hike increase, as well as an outlook on the pace of further tightening ahead of the central bank’s new inflation and GDP outlook, due in March.