RPP changes monetary policy bias to "neutral" opening the way for future interest rate cuts
At its yesterday's meeting, the Monetary Policy Council (RPP) shifted its bias from tightening to neutral, signalling that its next step might be lowering interest rates. RPP made it clear, however, that it would be cautious in cutting rates as inflationary pressure might still return. RPP has maintained the interest rates at the unchanged level of 19%-23%, ignoring mounting pressure from economists, the government, and IMF, which have recently called for rate cuts to stop a slowdown of the economy. In its announcement, RPP warned of inflationary pressures in the first half of 2001 and dangers from a still unclear fiscal policy for 2001. Its tight monetary policy resulted from a surge in inflation, which jumped to 11.6% y/y in July. RPP answered by raising the borrowing costs by a total of 600bps. But since July, inflation has been falling, reaching 9.3% y/y in November, while the economy cooled down with GDP expected to grow below 4% in Q4 2000, after a 6% growth in Q1. RPP missed its 2000 inflation target of 5.4%-6.8% though. Now, it seems to be more cautious in its monetary policy to meet the 2001 target of 6%-8%. Earlier this month, RPP announced the rate cuts would be possible in the first half of next year.
Źródło:IntelliNews Daily
