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Rate-setter “inclined towards further tightening”

Judit Neményi, a member of the National Bank of Hungary's rate-setting Monetary Council said in an interview with Reuters that wage data due out Tuesday would be important to weigh for a rate decision on January 24, but she was inclined towards further tightening.

“I'll wait to see the data this week -- mainly the wage data -- to decide whether further tightening is needed. I am inclined towards further tightening ...,” Neményi told Reuters. “If, based on the inflation prospects, we see next Monday that further tightening is needed, then we have to take that step then and there,” she added.

The Monetary Council has raised rates -- for the first time since October 2008 -- at the last two of its monthly meetings, by 25 bp each time.

“This tightening is not drastic, but it must be very decisive in order to eliminate the upward risks to the inflation baseline scenario as soon as possible,” Neményi said.

The Monetary Council said earlier that it raised rates in December “in light of inflation remaining persistently above the 3pc target as well as the upside risks to inflation.” “In the coming months, the Council will decide whether to raise interest rates after weighing up the balance of inflation risks,” it added.

In an interview with Reuters on Friday, MNB deputy governor Ferenc Karvalits said the tightening cycle started in November could be “moderate” and “protracted”.

Csaba Csáki, one of the external members of the NBH's Monetary Council, told Bloomberg in an interview last Tuesday that the Monetary Council could keep rates on hold at the meeting in January. “We never intended for a massive or lengthy tightening cycle,” he said.

Hungary's year-on-year CPI accelerated to 4.7% in December from 4.2% in November. The headline figure was well over analysts' estimate of 4.4-4.5%. (MTI – Econews)