Cablegate: Poland's Monetary Policy Council Continues

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS WARSAW 003287

SIPDIS

Sensitive

STATE FOR EUR/NCE DAVID KOSTELANCIK AND MICHAEL SESSUMS
USDOC FOR 4232/ITA/MAC/EUR/JBURGESS AND MWILSON
TREASURY FOR OASIA MATTHEW GAERTNER
FRANKFURT FOR TREASURY JIM WALLAR

E.O. 12958: N/A
TAGS: EFIN ECON PREL PL
SUBJECT: Poland's Monetary Policy Council Continues
Interest Rate Cuts

This cable is sensitive, but unclassified, and NOT for
Internet distribution.

1. (SBU) Poland's Monetary Policy Council (MPC) cut
interest rates for the fifth time in 2005, reducing all by
25 basis points (bp) except for the rediscount rate, which
dropped by 50bp. As of September 1, basic Central Bank
rates are: lombard rate 6.0 percent, rediscount rate 4.75
percent, reference rate 4.5 percent, and deposit rate 3.0
percent. The Council decided to maintain an easing bias for
monetary policy. The next MPC meeting on interest rates will
take place on September 27 and 28.

2. (U) In its statement issued after the August meeting,
the Council noted the risk of higher inflationary pressure
related to increasing oil and gas prices. The MPC also
commented that the situation on the fuel market may have
negative effects on economic growth in Poland.
Nevertheless, the Council does not see an immediate threat
to the 2.5 percent inflationary target for 2006.

3. (U) The current level of real interest rates in Poland
is 3.5 percent. This is considerably higher than in the
Euro zone and the U.S. and slightly higher than in
neighboring Hungary, where real interest rates continue to
drop and are close to three percent after the latest cuts on
August 23.

4. (SBU) Comment: While there is room for further
interest rate cuts in Poland, the market does not anticipate
another cut in September. Parliament will debate next
year's budget in September. The Monetary Policy Council
usually refrains from making decisions on interest rates
until budgetary discussions are completed.

ASHE

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