Złoty strengthens as the RPP raises interest rates

The Monetary Policy Council (RPP) decided to increase interest rates for the second time in a row, this time by 0.25 base points. This move surprised some economists as they were expecting that the RPP would leave rates unchanged until at least the end of August. Finance Minister Mirosław Gronicki told the press that he thought the decision was fully justified. The RPP stressed that the level of future inflation will be mainly affected by growing salaries in the economy and they think that there is already a tendency of growing wage demands. The Council intends to decrease the CPI to a level which will ensure that the NBP's 2004 inflation target of 2.5% is met. "This may result in smaller increase in nominal salaries," explained NBP chairman Leszek Balcerowicz. (Rzeczpospolita, pp. A1, B1) M.M.