Enter the dove

Urszula Grzelońska, tipped by Law and Justice politicians as a likely candidate for governor of Poland's central bank, suggested last week that she might oppose interest-rate hikes for the near future.

"There is no pressing need to raise interest rates. I think the Monetary Policy Council can wait for at least six months," she told reporters at an economic conference.

Her comments followed the publication of a central-bank projection, which illustrated that inflation will top its 2.5-percent target in early 2007 and threaten 3.5 percent by the close of 2008 without an interest-rate increase. Despite this, the central bank didn't raise the rate last week.

Following Grzelońska's statement, bond yields slid by two to five basis points. "The market believes she will be the next governor and these comments have shifted expectations [of a rate hike] forward to April or May," said a bond dealer from a foreign bank in Warsaw. (Reuters)