Rate rises likely as inflation shoots higher

Jan Czekaj, considered a key swing voter on Poland's interest-rate setting body, the Monetary Policy Council (RPP), has said that the chances of a rise in interest rates this month is higher than 50 percent, and added that further tightening throughout the year was also likely.

"Probably there will be two more rate hikes, whether [there will be] three it's hard to say," Czekaj said in a television interview.

In December, consumer prices rose at their highest rate in three years to 4.0 percent year-on-year, up from 3.6 percent in November. The central bank's inflation target is 2.5 percent.

Analysts are certain the RPP will raise interest rates by a quarter point to 5.25 percent when it meets at the end of the month. "A 25 basis-point interest rate increase in January is a foregone conclusion," said Arkadiusz Krześniak, chief economist at Deutsche Bank in Warsaw.

Some RPP members have suggested that the key rate will have to rise to six percent in 2008 in order to return inflation to the central bank's target in 2009 or 2010.

Central bank governor Sławomir Skrzypek was quoted last week as saying that the RPP would take "essential steps" to curb inflation. (Reuters)