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No U-turn in rate setting policy expected, says JP Morgan

London-based emerging market analysts don’t expect a turnaround in the rate setting policy of the National Bank of Hungary after the approval of two external members to the MNB’s Monetary Council on Monday.

“The Fidesz is cautiuos about the market reactions to its fiscal adjustment package and the changes in the Monetary Council”, and decided about the appointment of two persons who are not likely to draw negative market reactions or further negative comments from the European Central Bank, JP Morgan analysts said.

The change in the process of appointing Monetary Council members “raises questions about the independce of the council’ decision-making procedures”, but further conclusions should not be concluded without knowing the names of the two other candidates, JP Morgan said.

However, JP Morgan analysts said that worries about an immediate increase of the base rate – as a reaction to the new members - are “unjustified”.