Hot spots: Poland.(Central Bank raises interest rates)

Publication: Business Credit

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COPYRIGHT 2004 National Association of Credit Management

Late in August--and unexpectedly for the financial markets--Poland's Central Bank raised interest rates for the third time in as many months, by half a percentage point. This put the so-called Lombard rate, which the CB charges to banks borrowing overnight with government securities as collateral, up to 8.0 percent from 7.5 percent. The discount rate, which functions as a reference rate for some bank loans, was hiked concurrently to 7.0 percent from 7.5 percent.

The monetary authorities have been worried about inflation ever since the escalation of consumer prices in June began to overshoot the 2004 target of 3.5 percent with 0.9 percent for the month and 4.4 percent year-on-year. The Central Bank's Monetary Policy Council (MPC) raised interest rates on June 30 for the first time since August 2000, and it has been pulling the noose tighter ever since. In July, annual consumer price inflation was up...

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