A significant number of Federal Reserve officials are opting for a 50 bps hike in the federal funds rate instead of the widely expected 25 bps move, according to the minutes of the latest March FOMC meeting.
In terms of reducing the Fed's balance sheet, officials agree that monthly limits of about $60 billion for Treasury securities and $35 billion for mortgage-backed securities would likely be appropriate, with the amounts phased in over three months or slightly longer.
That's a larger reduction than the $50 billion per month the Fed set between 2017 and 2019. U.S. central bank officials also acknowledged that policy tightening may be warranted, depending on economic and financial developments.
Interest rates in Poland heading towards 6 percent?
The Monetary Policy Council also showed a hawkish stance, raising interest rates by 100 bps to 4.5%. The market expected a 50 bps hike, although a 75 bps move would not be surprising either.
The scale of the increase shows that the MPC is determined to fight inflation.
Although many of the factors causing price increases in Poland are external, the core measure of inflation, i.e. excluding food and energy prices, shows an increase to nearly 7 per cent.
Thus, it is possible that further interest rate hikes in Poland may occur. Based on FRA contracts, the market seems to evaluate the possibility of an increase in the 3-month WIBOR rate to as much as 6.5 percent, which could mean a NBP reference rate of 5.5-6.0 percent.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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