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Hungary: Balanced central bank in wait−and−see mode
Tue, Aug 26 2008, 09:19 GMT
by Lars Rasmussen
As both we and the consensus expected the Hungarian central bank (MNB) today left its key policy rate unchanged at 8.50%, the third successive meeting at which they have remained so after a total of 100bp in hikes since March 2008.
As the following statement shows MNB was fairly balanced in its comments. In particular it said: "The monetary council sees subdued growth and slow disinflation in 2010, in line with the forecasts presented in the new inflation report. According to the base case scenario, inflation in 2009 will exceed and in 2010 meet the inflation targets as a result of domestic and international price shocks." - Source www.mnb.hu.
Also, MNB cut its inflation estimate for 2009 to 4.1% y/y from 4.2% y/y forecast three months ago, and reiterated its 2010 estimate of 3.0% y/y. Governor Simor said that surprisingly strong Q2 GDP growth was due to one-off factors and did not reflect a trend. Consequently, the bank cut its GDP growth forecast for 2009 to 2.6% y/y from 3.2% y/y, and lowered its 2010 growth estimate.
At the press conference Mr Simor said that tight conditions are needed until a sustained reduction in upside CPI risks occurs. He added that the monetary policy council had discussed a 25bp cut at the meeting. We expect MNB to reduce rates this year, a view which the market is already beginning to discount. While we still foresee some risks that MNB could be forced to hike rates one last time, we only think this might occur if the forint weakens significantly.
The market has been very quiet today with no reaction to the rate decision. EUR/HUF lies stable around 233.7-234.0.
Published on Tue, Aug 26 2008, 09:22 GMT
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