Jump in inflation is likely to translate into interest rate hike

In May inflation amounted to 3.4% and according to analysts, this will encourage the Monetary Policy Council (RPP) to increase interest rates by anything between 25 to 75 base points. "The rapid increase of the index [from 2.2% in April] was mainly due to growing fuel prices and EU accession," said Piotr Bielski from BZ WBK. The Central Statistical Office (GUS) confirmed part of the information and stated that the price of fuel grew by over 15% in comparison to May 2003. Another reason for the acceleration of inflation was the increase in VAT on construction materials. "The degree, to which the increase in inflationary expectations would translate into growing prices, would be dependent on the labor market situation," said Łukasz Tarnawa from PKO BP. He added that May data concerning industrial output and exports might be slightly worse than the one observed for the last few months. (Parkiet, p. 1) M.M.