The National Bank of Hungary's Monetary Council voted 5:2 to keep the base rate on hold at 5.25% - the first pause in a campaign of rate cuts started last July - at a rate-setting meeting on May 31, the condensed minutes of the meeting published on Wednesday show.
Central bank governor András Simor, together with deputy governors Ferenc Karvalits and Júlia Király, and Péter Bihari and Judit Neményi voted to keep the rate on hold. Tamás Bánfi and Csaba Csáki voted to reduce the rate by 25bp to 5.00%.
Simor said at a press conference after the meeting in May that a “convincing majority” of members had voted to keep the rate on hold. The only other proposal was to cut the rate by 25bp, he added.
“Monetary Council members agreed that there had been a deterioration in the outlook for inflation and perceptions of risks associated with the economy compared with the positive developments in the previous period, reducing the scope for easing monetary policy,” according to the minutes of the meeting. Most of the inflationary risk was from external factors, such as higher oil prices and a weaker euro, but the pick-up in domestic industrial output as well as domestic consumption could be faster than previously assumed, also pointing to a higher inflation path. Most Council members acknowledged the negative effective of waning appetite for risk after the escalation of the Greek financial crisis, but members also agreed that “uncertainty about the prospects for the domestic economy had not lessened either.”
“Interest rates might only be reduced further if the outlook for inflation and perceptions of risks improved,” the Council said. (MTI-Econews)