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Tuesday, November 27, 2007

Poland Central Bank Meeting

Poland's central bank raised its benchmark interest rate for a fourth time this year today after higher food costs and strongly growing consumer demand is firing up inflation inflation. The bank's Monetary Policy Council lifted the seven-day reference rate by a quarter point to 5 percent.

Poland's $350 billion economy is expected to expand 6.5 percent this year, compared with last year's 6.6 percent, bolstered by domestic consumer demand. Poles are buying more cars, furniture and household appliances after wages soared 10 percent this year and new jobs were created at a record pace.

The zloty traded at 3.651 per euro after the decision, little changed from 3.651 before the decision and up from 3.672 yesterday. Yield on the government's five-year bonds was unchanged after the rate decision. It fell 2 basis points to 6.012 percent from yesterday.

The inflation rate rose in October to 3 percent, above the central bank's 2.5 percent target and in the upper part of the 1.5 percent to 3.5 percent range. Policy makers raised the benchmark rate by three-quarters of a point between April and August in three quarter-point increases.

The average corporate wage rose 11 percent in October, the fastest annual pace in seven years and the unemployment rate fell to an 8 1/2-year low of 11.3 percent. With more money in pockets, Poles moved to buy cars, furniture and household appliances, boosting retail sales in October an annual 19.4 percent, the highest in 3 1/2 years.

The consumer-optimism indicator WOK, compiled by Ipsos market researcher, rose in November by 5 points to 112.9, the highest since 1991.

The Lombard rate, which the central bank charges to commercial banks borrowing overnight with government securities as collateral, was also lifted by a quarter point to 6.5 percent. The discount rate, a reference rate for some bank loans, will rise to 5.25 percent, also by a quarter point.

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