The National Bank of Hungary’s (MNB) Monday decision to keep the base rate on hold at 9.50% conformed to the market’s expectations, while the strengthening of the forint on Monday was due to coordinated declarations from central bank governors in central and eastern Europe in support of regional currencies, analysts polled by MTI said on Monday.
Concorde Securities’ János Samu said the only option for the Monetary council was to keep the base rate on hold. Samu added that the coordinated statements of the National Bank of Hungary, the Czech National Bank, the National Bank of Poland and the National Bank of Romania aimed at preventing central and eastern European currencies from depreciating too quickly underpinned strengthening from regional currencies.
Simor remarked that adoption of the euro continues to be the most important objective, noting that Hungary can realistically satisfy the Maastricht criteria if the 2010 inflation target, 3% deficit targets and the prime minister’s proposed objectives are met.
Samu forecast the euro-forint rate will stabilize over the short-term at around 290, though a cut in the key-rate will be only possible if the forint remains relatively strong for a period of weeks.
Takarékbank’s Gergely Suppan said the inflation outlook and economic recession would justify a rate cut, though monetary stability remains fragile. Suppan commented that a rise in rates would not have been justified in spite of an increase in government-bond yields, noting that some analysts had expected that monetary council to raise rates nonetheless.
Suppan said the firming of the forint cannot be considered a trend, though coordinated central-bank action could provide regional currencies with support. Suppan added that a rate cut will be possible only when confidence has improved on the market, a condition that will be manifested in government-bond yields. (MTI-Econews)