RPP cuts rates by 25 points but warns of delayed impact

The Monetary Policy Council (RPP) said in a statement yesterday it had trimmed its main market rate by 25 basis points because price pressure and inflation expectations remained benign and domestic demand was weak. But the RPP warned that potential inflation pressure existed in the delayed impact of its past rate cuts, global oil prices and recently rising producer prices, "Among the factors bearing potential inflationary pressure is the scale of past rate cuts, which will have a delayed effect... and boost domestic demand in the second half of 2003 and in 2004," read the RPP statement. The council also unveiled a new medium-term strategy focused on maintaining inflation within one percentage point of 2.5%. Until now, the RPP had only year-end targets, with its December 2003 goal at 2%-4% year-on-year. (Reuters) A.Z.