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Hungary: Coalition split forces rate to 10%?

The Hungarian Central Bank (MNB) raised the prime rate to improve credibility while the domestic macro situation is likely to invite fiscal relaxation next year, according to the regional analysis of JP Morgan.

With the interest rate considerably higher than in the other states of the region analysts expect a falling rate cycle to resume from the Q1 of 2009. London analysts were completely divided before the rate decision – and the coalition crisis – whether monetary restriction would follow or not.

Merrill Lynch investment experts believed that “rate hike is the last thing that the Hungarian economy needs”. Michal Dybula, Eastern European economist of BNP Paribas told Hungarian news agency MTI, that if the political turmoil ends with a coalition split the prime rate may get as high as 10% by June. (Gazdasági Rádió)