Polish finance ministry sees CPI at 3-yr high in Dec

By Patryk Wasilewski and Kuba Jaworowski

WARSAW, Jan 2 (Reuters) - Polish inflation probably rose to 4.0 percent year-on-year in December, its highest in three years, the finance ministry estimated on Wednesday, reinforcing expectations of an interest rate increase this month.

In month-on-month terms, the ministry expects prices to have grown 0.3 percent last month. The year-on-year figure stood at 3.6 percent in November.

Inflation in Poland, driven by rising fuel and food prices as well as strong demand, has been accelerating consistently since August.

The ministry estimated food prices grew 0.5 percent month-on-month in December, more slowly than in the previous months.

Deputy Finance Minister Katarzyna Zajdel-Kurowska said this signalled pressure on inflation from food could be waning.

Inflation now stands much above the central bank's 2.5 percent target.

In response to the growing inflationary pressures, the Monetary Policy Council (MPC) raised interest rates four times last year, bringing the main rate to 5.0 percent from an all-time low of 4 percent before the first hike in April.

Most analysts expect further monetary tightening in the months ahead as wages continue to grow at double-digit levels and the economy remains strong, expanding above 6 percent.

MPC member Jan Czekaj said the council was in a tightening mode and that interest rates would rise more.

"We are in a tightening mode and interest rates will rise further. (...) Labour costs are most important now," Czekaj told Reuters.

He also said the economy would continue to grow strongly in 2008 and that he saw no barriers to growth ahead. (Writing by Karolina Slowikowska)
Source: guardian.co.uk