Interest rates increase on the cards after inflation exceeds RPP target

Analysts agree that the Monetary Policy Council (RPP) will increase interest rates either on Tuesday or before the end of the summer recess. They say the reason behind the expected decision is obvious, as inflation at the end of June exceeded 4.4% and went over the RPP's target. Analysts believe that the increase will amount to 50 basis points, but they are clearly divided over when this would happen. Some point out that the main reason for growing CPI index is the food prices increase, which has already slowed down and it is even likely to decrease in the second half of July. This would mean that inflation would start falling in August and therefore a rates increase could easily hurt the economy. Analysts expect further increases in fall 2004. (Parkiet, p. 6) M.M.