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London forecasts high inflation

Analysts of ten large investment companies in the UK - UBS, Deutsche Bank, Crédit Suisse, Dresdner Kleinwort, Merrill Lynch, Goldman Sachs, JP Morgan, Barclays Capital, BNP Paribas, Lehman Brothers - forecast the annual inflation rate in January to reach 7%-7.8%, in Hungary. Goldman Sachs predicts base rate hike.

The majority of the forecasts hover between 7%-7.4%, but Goldman Sachs believes the inflation figure of Hungary could top at 7.8%, the average projected to reach 7.17%. The GDP growth of the Q4 of last year may be 0.4%-1.4%, following the 0.9% increase of the Q3. Merril Lynch is the most negative among analysts, saying the GDP growth could not have been higher than 0.4% in the last three months of 2007. Goldman Sachs counts on a 50 basis point raise of the base rate of the central bank (MNB) this month leaving the base rate at 8% until the end of this year. The Central Statistical Office (KSH) will present its Q4 GDP data today based on preliminary figures.

Some financial analysts in London do not exclude the possibility that the central bank (MNB) may increase the base interest rate by 50 basis points this month. Goldman Sachs was the first investment advisor to issue such a forecast referring to an interview with MNB deputy governor Ferenc Karvalits. Goldman Sachs believes MNB’s monetary council may take this decision already on February 25. This month’s rise is not sure yet, although the markets expect a higher rate now for the next three months, but since the inflation rate of Hungary will most probably be above 3% in 2009 and the Hungarian currency is getting weaker, this is likely to lead to the rise of the interest rate, Goldman Sachs reasoned. MNB may project the 2009 inflation rate to reach 3.8%-4% depending on how much they calculate the global food price growth in it. Should MNB not raise the base interest rate, the Hungarian forint may seriously weaken, Goldman Sachs said. (Gazdasági Rádió)