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Cbank Council voted down governor in July

The Hungarian central bank’s decision to keep rates on hold at 8.50% on June 23 was backed by 6 rate setters, while 4 voted for a 25 basis point hike, including Governor András Simor and one of his deputies.

This was the first time the rate-setting Monetary Council has voted down Simor, the minutes of the June 23 meeting published on Friday showed. Deputy Governor Ferenc Karvalits also voted for a hike, while Deputy Governor Julia Király voted to hold rates.

Analysts said the minutes showed the Council was divided and the rate outlook was uncertain, even though no rate hike is expected this month. “The Council was quite divided and we cannot say that the minutes were not hawkish. Those who argued for keeping rates on hold wanted to slow (the rate hike) cycle,” said Dávid Németh at ING Bank.

The bank surprised markets last month by keeping rates on hold as analysts had expected a hike of 25 basis points after a rise in inflation in May to 7.0% from 6.6 in April. “Members agreed that the price and wage trends, fundamentally influencing the outlook for domestic inflation, were surrounded by a significant degree of uncertainty,” the minutes said. The bank had hiked rates by a cumulative 100 basis points earlier this year.

The Council said it would be ready to take steps to defend the bank’s 3% medium-term inflation target. “The Council maintained its view that it should continue to pursue a tight monetary policy and it was ready to take the necessary steps, if the inflation target was put in jeopardy,” the minutes said.

The forint has rallied since last month and data earlier on Friday showed inflation slowed in June to 6.7%. (Reuters)