RPP may face a dilemma of how to soft land the złoty

"Data on January inflation totally changed the picture of the market. Nobody expected the CPI to drop to 4%," said Marek Nienałtowski, an analyst with Palladia Capital Markets. This resulted in hopes of quicker and higher cuts in interests rates, which in turn boosted the demand for T-bonds and Polish currency. "Due to this, short-term investors started to shift capital to this part of Europe. Nobody was expecting such a visible change in the trend on the market in relation to USD/EUR," added Nienałtowski. This month's session of the RPP will end on Friday and the Council seems set to change its monetary policy stance from restrictive to neutral, but the main question remains the shape of its communiqué. In related news, Finance Minister Mirosław Gronicki, informed that GDP growth will drop from 5.4% in 2004 to 4.5-5% in 2005. (Puls Biznesu, p. 6; Parkiet, p. 8) M.M.