RPP raises interest rates to stem growing inflation

The main interest rate now stands at 5.25%. Most likely this does not mark the end of the series of rate hikes, but the RPP is in a difficult situation as inflation is rising and the deteriorating economic situation in the USA might impact on the Polish economy. The CPI is at its highest level in three years and in January it will most likely exceed 4% due to growing prices of food and fuel. However, there is also an increasing influence of growing wages and employment costs. Yet again, the Council stressed that a threat to the stability of prices is the shape of the state budget, as lowering taxes for consumers and growing wages in public administration might contribute to increasing inflation. In related news, according to preliminary data from the Central Statistical Office (GUS) GDP growth amounted to 6.5% in 2007, which is the most rapid pace in the past ten years. It is very favorable that economic development was fuelled by consumption and investments rather than exports, which helps buffet Poland against external shocks. (Rzeczpospolita, pp. A1, B1, B2; Parkiet, pp. 1, 11, 13, 23; Puls Biznesu, p. 6; Dziennik, pp. 1, 10)M.M.