Poland’s Monetary Policy Council (RPP) increased the reference interest rate by 75 basis points to 5.25% on Thursday.

In addition, the National Bank of Poland's (NBP) Lombard rate was also increased from 5.0% to 5.75%, the rediscount rate from 4.55% to 5.30% and the discount rate from 4.6% to 5.35%. 

The Monetary Policy Council also hiked the deposit rate at the same time from 4.0% to 4.75%. 

"The NBP will continue to take all necessary steps to ensure macroeconomic stability, and, above all, to reduce the risk of enduring inflation," according to a statement issued following the RPP meeting.

The Council added that further decisions will depend on future inflation and economic activity data, taking into account the impact of the war on Ukraine on Poland’s economy, reports The First News.

The RPP said it made the decision to increase rates in an attempt to curb inflationary pressure, as inflation is forecast to surpass the central bank’s target. However, economic sentiment in Poland is predicted to be positive in future quarters, according to the RPP, yet there will likely be an economic growth slowdown.

Moreover, the Council said the central bank could undertake a foreign exchange intervention in order to curb Zloty fluctuations.

This latest increase is the eighth consecutive rise, and according to economists is a response to soaring inflation and a weakening of the national currency.

The Polish Zloty has declined against the Euro, despite FX interventions carried out by the National Bank of Poland and the finance ministry, as a result of market uncertainty stemming from the war in Ukraine.

Furthermore, Poland’s Consumer Price Index rose by 12.3% year-on-year and by 2.0% month-on-month in April, as per the Central Statistical Office.