Hungary: Analysts predict base rate cut

Analysis

The majority of analysts expect the Monetary Council of the Central Bank (MNB) to decrease the base rate of the forint by 0.25 percentage points to 7.5% today, as shown in the joint survey by news agency Reuters and the website Portfolio.hu.

If so, it will be the first time since June. What provides for the higher-than-expected rate decrease of 0.5 percentage points by the American central bank last week, as well as the falling inflation in Hungary. The analysts’ consensus predicts an annual inflation of 6.2 % for September, as against the 8.3% in August. However, both the 2007 and 2008 inflation expectations are up, by 0.2 percentage points to 7.7% and by 0.5 percentage points, respectively. Although the annual economic growth might be faster in Q3, 1.8% as against the 1.4% in Q2, the whole-year expectation dropped 30 base points to 2.1% for 2007 and 10 base points to 3% for 2008. Still, the analysts’ consensus is higher than the government's forecast of 2.8 %. Neither the 7% base rate consensus for the end of 2007, nor the 6.5% for the end of 2008 have changed during the last month, portfolio said. (Magyar Hírlap)

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