Nobody can say when Hungary will be prepared to adopt the euro under the current circumstances, National Bank of Hungary (NBH) president Zsigmond Járai told a meeting of the American Chamber of Commerce on Thursday.
"The market believes the euro could be introduced (in Hungary) in 2013-2014, but there are still many question marks," Járai said. One thing is certain, though, that the government's convergence program will not lead to the eurozone, Járai said. He added that Hungary would need at least four years to meet the Maastricht criteria for adopting the euro, even with an effective convergence program.
Járai conceded that Parliament's approval of the draft 2007 budget would show the government's commitment to fiscal discipline, but the rate of state redistribution of Hungary's GDP would still increase next year. Speaking about Hungary's inflationary outlook, Járai said that even though the central bank's inflation target is out of reach for now, monetary policy conditions are sufficiently tight at the moment as inflation is expected to come down to the bank's price stability target in 2008. "Current monetary conditions are strict enough, the forint is strong enough," Dow Jones quoted Járai as saying.
The next meeting of the central bank's MPC is scheduled for December 18. Most analysts expect it to leave the base rate unchanged at 8.00%. Járai said the bank remains focused on price stability, which it defines as a 3% mid-term inflation target, despite missing that target this year and next year. Although much is still unsure, inflation is expected to peak around 8% in the first half of 2007, then drop to an annual average 4% in 2008. The MPC is determined to tighten monetary conditions if it sees that chance in danger, he added. "The central bank is trying to have a strict monetary policy, if needed, to achieve that goal," Járai said. (Mti-Eco)