US embassy cable - 05WARSAW3287

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, Economy 
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