Forecast for interest rate increase
Monetary policy with the repayment of a large liability is one of the most serious categories of economic risk, especially for a tight budget. The increase in interest rates ultimately depends on inflation.
Inflation target and extortion of interest rates
The borrower should follow the strategy of the National Bank of Poland and the inflation target adopted for the coming years. Exceeding the inflation target is a very clear signal to change monetary policy, of course to the detriment of borrowers. At higher interest rates, installments of a different amount are repaid.
The schedule is updated automatically by the retail bank. Another point to observe is monetary policy in EU countries, as well as in global economies. Most central banks need to watch major players to maintain currency balance and stability in financial processes.
Monetary Policy Council in some anxiety
In Poland, the Monetary Policy Council (MPC) decides about changes in interest rates. From March 2019 it is clear that inflation is jumping beyond economic and political assumptions. The more “empty” money in the economy, the lower its value. Inflation in Poland (chart) is already in a clear upward trend, with virtually no correction potential in the near future.
Borrowers have experienced a marked jump in the prices of electricity, fuel, food. High interest rates are a chance to curb inflation, while a large loss for borrowers. The only counteracting options are overpayments, refinancing of debt, replacement of the property with a cheaper one, improvement of creditworthiness and negotiation of more favorable repayment terms.
Macroeconomics leads to simple conclusions
Most members of the Monetary Policy Council report the need to raise interest rates, which is a very clear, pre-emptive signal. The macroeconomic bases will lead inflation to a dangerous level of 3-4% as early as 2020. One increase in interest rates is not a huge burden, but it rarely ends with only one shift. In order to respond to inflation, pre-emptive action by the central bank is needed.