Stabilizing forces

Poland's financial markets picked up following the strongest intervention by the US central bank in 23 years. The Federal Reserve cut the benchmark federal funds target rate by 75 basis points. However, economists believe that the slowdown in the US and global markets should not heavily impact Poland's economic growth.

The unexpected decision by the Fed to lower rates to 3.5 percent was seen as an attempt to lend support to the US economy, which many experts believed to be on the verge of recession. While analysts agree that the move was a good one, some fear that a recession could still hit the US in the first quarter of 2008, though thanks to the cut it would not last long.

Recent falls on global markets have been echoed throughout Europe, including Poland. The złoty has lost nearly two percent since mid- January, when it started weakening in light of fears for the stability of the global economy, and the Warsaw Stock Exchange's bluechip WIG20 index fell 6.5 percent on Monday last week, when it was some 30 percent down from the record highs it reached last year.

While the worries about global markets still remain, London's FTSE100 rose by as much as three percent following the move by the Fed and Warsaw's overall WIG index was up by 1.4 percent. At the same time, the złoty appreciated against the euro by 1.2 percent and bond yields were down some three to five percent. Between Tuesday and Thursday, the WIG20 gained 5.7 percent. On Thursday, the WIG closed up 4.18 percent.

Prime Minister Donald Tusk said on Tuesday that the recent market falls on the global and domestic financial markets should not have a negative impact on the country's economic growth. "I understand events on the Polish bourse are an echo of what is happening on the global markets ... [but] I do not think that these falls should harm our economic growth," Tusk told a news conference.

"Poland is still a very promising market and there is no possibility of a crisis or a bad scenario," Tusk said. (Reuters)