NBP cuts rates by 25 points, inflation at post-communist low of 0.3%

The national bank (NBP) trimmed interest rates by a quarter point yesterday, easing borrowing costs for a fifth month as low inflation pressure continues. The reduction took the main market rate to a new low of 5.5%, down from a peak of 19% two years ago, and analysts said comments from the Monetary Policy Council suggested more easing was possible in coming months. The cut came as no surprise to markets as inflation hit a post-communist low of 0.3% and economic growth still runs below potential despite increasing signs of recovery. "Sustainably low inflation has taken hold while factors limiting price growth in the future have strengthened," NBP chief Leszek Balcerowicz told a news conference. He added that the bank's 2003 inflation target of 2%-4% could be undershot this year and pinpointed uncertainty over fiscal policy as the main risk factor for the future. (Reuters) A.C.