Monetary Policy Council says interest could rise if inflation remains uncurbed

Monetary Policy Council says interest could rise if inflation remains uncurbed The Monetary Policy Council (RPP) has set next year's inflation target at the level of 6-8%,and even if prices stop climbing, a drop in interest rates should not be expected. If some obstacles are encountered in maintaining the inflation goal, than the RPP may even raise interest rates again. RPP member Grzegorz Wojtowicz blames fuel and food prices for affecting the inflation rate. "We assume that their influence will decline," he noted. "If the budget deficit exceeds 1.6%, we may then be threatened by further increases in interest rates," said CDM Pekao SA analyst Iwona Pugacewicz-Kowalska. According to her, such a decision would increase bad debts in banks from the present 15%. "Only small banks would be affected by the rise in interest rates, as they often do not have reasonable loan policies," said Credit Suisse analyst Tomasz Stadnik. "There has been a sharp drop in investment to a level lower than three years ago. Interest rate increases have influenced this change," Stadnik observed. "High interest rates will complicate small and medium enterprise activity, since its financing is more expensive The large companies will experience lower profitability and this in turn will affect the entire economy," said Wielkopolski Bank Kredytowy (WBK) president Jacek Ksen. (Puls Biznesu, pp.1, 26)