MNB to keep base rate at 6% by late 2012 - analysts


As a result of the uncertain outcome of the euro-zone's debt crisis the National Bank of Hungary (MNB) will most likely keep the base rate at 6% for a long time, presumably until the end of 2012, analysts told MTI on Thursday.

Gergely Suppán of Takarékbank said inflation in Hungary in previous months decreased more than expected.

Suppán added that prices of raw materials, especially foodstuffs, show that external inflation shocks and the inflation pressure it caused could decline faster than expected, adding that there is no wage- or demand-pressure present in the economy.

 The 3% inflation target can be reached before the end of 2012, which raises the issue of cutting interest rates, the analyst said.

However, debt worries with regard to countries on the periphery of the euro-zone cause certain financial that can be intensified by the strengthening Swiss franc, Suppán said, adding that financial stability risks are preventing a loosening in monetary policy.

Suppán said that the MNB's communication can ease up, some members in some cases could raise the matter of cutting the base rate, but the MNB will keep the rate at 6% and could only decrease it at the end of next year earliest.

Dániel Bebesy of Budapest Alapkezelő is expecting the MNB to continue its cautious interest policy. Bebesy said that inflation figures of previous months were a pleasant surprise, but the tense international environment leaves no option for the bank to cut the base rate.

The forint has been on a weakening trajectory since mid-2010, while long-term security yields are rising and the CDS premium representing the country's risk is also high.

The euro-zone's unpredictable debt crisis warrants attention, even if inflation-target logic could point at a decrease, Bebesy said.

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