Fears of continued stagnation and low inflation prompt interest rate cut

The Monetary Policy Council (RPP) lowered its main base interest rate yesterday by 50 points to 7.5%. The decision was taken partly as a reaction to the lack of clear signs of an economic recovery and partly due to the record low inflation. This is RPP's twelfth interest rate decrease since February 2001. "It was not the current shape of the budget that helped us reach this decision," said National Bank of Poland (NBP) governor and RPP chairman Leszek Balcerowicz. According to the NBP's forecasts, inflation will be around 2%, or even lower by the end of the year. Like the Czech Republic, Poland has prices under control, but unlike its neighbor the higher government debt has prevented a faster cut in rates. Most economists envisaged the reduction, although some of them suggested that the RPP could have delayed its decision until October. (Rzeczpospolita, p. B1; Reuters) M.T.