The Monetary Policy Council is preparing to increase interest rates even though inflation fell to 2.2 percent in July, according to economists. June inflation was at 2.3 percent, and though the rate might be more or less the same in August, it could start to increase as of September.

Economists say that inflation is not going to get any lower this year. According to Dariusz Winek, chief economist at BGŻ, the year might end with 2.6-2.7 percent inflation, a relatively optimistic prognosis. Marta Petka-Zagajewska of Raiffeisen Bank expects 2.9-3 percent inflation. Jarosław Jacek, economist at Societe Generale, said flooding and droughts, the ever-longer time for delivery in industry - a characteristic of an economy which is speeding up - and a predicted one percent VAT increase, which could see prices increase significantly more than just the value of the tax, could all be factors affecting inflation.

According to most economists, the Monetary Policy Council will not sit by idly and Mr Winek predicts an interest rate increase of 75 base points by February.

Poland AM