RPP policy document urges structural reforms to maintain financial stability

The Monetary Policy Council (RPP) said in policy guidelines for 2002 releas ed yesterday that budget cuts and labor market reforms would determine the depth of future interest rate cuts. "Structural reforms are crucial to main taining macroeconomic stability in coming years... The room for monetary po licy moves... will depend on the scope of the reforms," the 10-member RPP s aid in the annual document. However, the RPP's call for rigorous reform sug gests relations will be strained with the incoming government, which is lik ely to be constrained by a coalition partner. The Democratic Left Alliance (SLD), which won parliamentary elections but without an overall majority, h as vowed to slash spending to prevent a looming financing crisis. But analy sts warn that its slim victory may have undermined its ability and determin ation to push through deep and socially painful reforms. The RPP also said uncertainty over global growth following the terrorist attacks on the United States strengthened the case for structural reforms to boost long-term Poli sh growth. (Reuters)