MPs put central bank reform on hold

Parliament will not debate controversial proposals to reform the central bank in the near future, a key deputy said last week, signaling that a truce between bankers and politicians will hold. The head of Parliament's public finance committee said deputies, who returned to Warsaw last week from the summer recess, will focus on finalizing the 2003 budget rather than the central bank legislation. "There is no need to hurry with this bill," said Mieczysław Czerniawski, the committee's chief. "Talks between the government and the central bank are taking place and we are waiting for the budget draft. "We simply have more important things to deal with, and I do not see the need to work on this bill currently," said Czerniawski, a member of Prime Minister Leszek Miller's ruling Democratic Left Alliance (SLD) party. Earlier this year, heated arguments between the national bank and the left-wing government over economic policy led some cabinet politicians to propose changes to the bank's charter, which would force it to slash interest rates.

The bills would have widened the bank's inflation-fighting mandate to include boosting growth and jobs. They would have also boosted the size of the Monetary Policy Council, the bank's interest rate-setting body, enabling it to be packed with doves. Analysts warned that the tense relations between policy makers hurt their efforts to lift the economy from its deepest growth slowdown in more than a decade by limiting cuts in steep interest rates. But the war of words has died down recently amid signs that the economy may be turning the corner, leaving analysts wondering whether the central bank amendments would remain mired in committee work. Czerniawski said that he didn't know if work on the central bank bills would continue at all this year. Ministers have until the end of this month to present their 2003 budget draft to Parliament, which must send it for approval to the president by the end of January. The first parliamentary budget reading has been set for Oct. 16. Analysts hope that unexpectedly low inflation this year will prompt the central bank to cut rates again in the coming months, especially after the cabinet's full fiscal plans have been unveiled. Low inflation, combined with signs from the real economy that growth is rebounding, should ease government pressure on the central bank for steep interest rate reductions. The bank's key interest rate is now at 8%, or nearly 7% above inflation. - Reuters