The decision was in line with analysts’ expectations. The council discussed three options, keeping base rate, cutting it 25bp or raising it 25bp. The last proposal enjoyed a safe majority, NBH president Andras Simor told a press conferences after the meeting. At its previous rate setting meeting on April 28 the Monetary Council voted to raise the bank’s key rate 25bp to 8.25% with a vote of 7:4, the condensed minutes of the meeting, published on May 16 revealed. Four members voted to leave rates on hold. According to the minutes, because of the unfavourable outlook for inflation, the Council considered it especially important to maintain the credibility of the bank’s monetary policy and to stand ready to take any steps necessary to meet the 3% inflation target for 2009.
In April, Council members agreed that the inflation outlook continued to be surrounded by a high degree of uncertainty. Under these circumstances, decisive action could reinforce the role of the inflation target in guiding expectations and reduce the real economic costs of achieving price stability, they said.
The National Bank of Hungary (MNB) raised its inflation forecast for 2008 to 6.3% in its latest Inflation Report published on Monday from 5.9% in the previous report in February. In the February report, the central bank raised its forecast to 5.9% from 5.0%. The report puts annual average inflation in 2009 at 4.2%, up from the 3.6% forecast in February. The bank forecast — for the first time — annual average inflation of 3% for 2010. The bank originally targeted 2009 for meeting its 3% mid-term “price stability” target. The report projects consumer price inflation of 6.2% in Q4 2008 and 3.4% in Q4 2009.
The MNB also raised its growth projections for Hungary’s economy to 2.2% in 2008 from 2.0% in the previous report. It put GDP growth in 2009 at 3.2%, up from 3.0% in the previous report. The report puts the current account defcit at €5.3 billion, or 4.9% of GDP, in 2008, and at €5.5 billion, or 4.8% of GDP, in 2009. (MTI-Econews)
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