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23.12.200810:05:00UTC+00Polish Central Bank cuts interest rates: beats market expectations

The Polish Central bank slashed interest rates by a more than expected 75 basis points, Tuesday. The sharp cut was made to fight a deepening recession in the Polish economy, economists said. Experts were looking for a 50 basis points cut. This was the second interest rate cut the central bank had made in two months.

The new rates will be effective from December 24th, the Central Bank said. The new reference rate will be 5% on an annual basis, while the Lombard rate was reduced to 6.5%. The deposit rate henceforth would be 3.5%, while the rediscount rate would be 5.25%.

The central bank's action comes in the backdrop of a sharp slowdown in industrial output in November, while retail sales continued to be weak. Economic growth for the full year 2008 would certainly be revised down, economists said, while inflation cooled by falling oil and commodity prices was not considered a threat anymore. After the central bank decision, the zloty gained a little vis-?-vis the euro. With the global recession spilling out into Eastern Europe, economists anticipate more such interest rate cuts across the region, to stimulate stagnating economies.

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