RPP cuts interest rates by 0.25%

The Central Bank cut interest rates by a quarter of a percentage point yesterday, reducing its main rate to a record low of 6.0% despite concerns over domestic politics and the war in Iraq. The move was expected by markets and extended a two-year-old easing cycle which has brought rates down from a peak of 19% but has so far failed to revive growth in Central Europe's largest economy. The cut came even though Prime Minister Leszek Miller lost his parliamentary majority this month, President Aleksander Kwaśniewski has pressured Miller to quit over a corruption scandal and Polish troops have joined the US-led war on Iraq. Some analysts had said that political uncertainty, which has knocked the złoty lower and stoked concern over the outcome of June's EU referendum, could have made the Monetary Policy Council (RPP) hold rates. Analysts said the RPP clearly indicated that it is leaning towards further easing. With annual inflation at just 0.5%, some expected rates to be cut by another full percentage point by the year's end. (Reuters) A.K. U.S. may write off $1 billion - $2 billion from F-16 purchase The US government is considering whether to write off $1 billion - $2 billio n of Poland's debt for its recent purchase of 48 F16s. There are two possible reasons for such generosity - the first, although rather unlikely, is some form of gratification for the government's support of the Iraq war, and the other may be approval for a rapid signing of the offset deal. Poland is to pay $3.5 billion for the planes, which together with the costs of financing the US government's loan may cost tax-payers $4.7 billion. The information about the US's intentions has been confirmed by Jacek Piechota, the head of the offset team at the Economy and Labor Ministry. "This issue did indeed arise during the offset negotiations. The Americans asked what would happen if they wrote off part of the loan. We are analyzing the matter and a solution should be reached by the end of the week," declared Piechota. (Puls Biznesu, p. 4) A.C.