Monetary Policy Council member believes optimism on economy excessive

Monetary Policy Council (RPP) member Boguslaw Grabowski welcomed National Bank of Poland (NBP) data on monetary supply, according to which individual savings rose 2.8% in January, but he would not say whether RPP would lower interest rates at its meeting next week. According to NBP, borrowing grew only 0.8% over the first 30 days of this year and analysts expect inflation for January to be below 8%, but Grabowski still insists that financial markets are overly optimistic in their evaluation of the economy. └Looking at currency transactions on the interbank market, it is evident that investors are counting on an interest rate cut of at least 5 points. They could be disappointed,■ said Grabowski. He pointed out that in February and March the government will start paying out compensation to some pensioners and public sector workers whose pensions and salaries had not been adjusted to inflation back in 1992. Together with compensation from Germany for Third Reich victims, this could amount to an extra zl.10 billion hitting the market, which could dangerously stimulate domestic demand, said Grabowski. Meanwhile, according to CDM Pekao S.A. brokerage analysts, if inflation drops to 7.4%-7.5% in January, the likelihood of a 1.5-2 point rate cut is 70%. (Puls Biznesu, p.23) T.J.