(Bloomberg) -- The Polish central bank gave no indications that it's ready to pause raising interest rates after lifting the benchmark to the highest level in a decade to fight surging inflation.
In a shock decision, policy makers lifted the reference rate by 1 percentage point to 4.5% on Wednesday and repeated that they'll do whatever it takes to combat persistently high inflation. The size of the hike eclipsed the predictions of the 31 economists surveyed by Bloomberg and came amid mounting concerns that war in neighboring Ukraine may hurt economic growth.
The zloty strengthened following the decision and the central bank repeated that it's ready to intervene on the market to prevent currency depreciation. Policy makers expect the economic situation to remain favorable in the coming quarters as growing household incomes contribute to rising prices.
Poland's inflation accelerated to 10.9% in March, even as the government cut levies on everything from fuels to food to provide relief to consumers.
The Monetary Policy Council “assessed that there is a risk of inflation running persistently above the target within the horizon of the impact of the monetary policy,” it said in a statement following the decision. “The rate increase will also act toward limiting inflation expectations.”
The seventh rate increase in as many months comes after Governor Adam Glapinski repeatedly dismissed concerns the war in Ukraine will drive the European Union's biggest eastern economy into recession. He will explain the latest decision during a news conference at 3 p.m. in Warsaw on Thursday.
“This looks like a salvo to boost the zloty and show determination to fight inflation,” mBank economists said on Twitter. “It probably means front-loading of hikes rather than a prelude to a higher terminal rate.”
While growth so far has remained robust, there are already signs that manufacturing is starting to sputter as the war fuels uncertainty and disrupts supply chains. Poland has hosted more than 2 million refugees from Ukraine, prompting the government to increase spending.
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