Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Wednesday, August 27, 2008

Hungary Central Bank Keeps rates On Hold

Hungary's central bank (NBH) Monetary Council decided on Monday decided to leave its key policy rate unchanged at 8.50%. The rate has now remained unchanged since last May. In general the market did not expect the MPC to change the base rate today and the main debate is over when we will see the first signs of monetary easing, although this may be more difficult than it seems given the need to underpin the value of the forint.

Also the National Bank of Hungary (NBH) and the Hungarian government agreed on Monday to maintain the inflation target at 3.0% for the next three years. Finance Minister János Veres and NBH Governor András Simor announced the decision at a press conference after the Monetary Council left the base rate unchanged.

The smaller-than-expected reduction oin the headline inflation forecast and the vaguely hawkish comments from bank governor Simor tend to decrease the prospects of an early interest rate cut. It now seems increasingly likely that we will have to wait till 2009 to see the first rate cuts.

The most likely scenario is that the NBH will stay on hold over the next few months, barring some radical external or internal development. The NBH would like to see some sign that the labour market loosening finally results in a moderation of wage inflation, and also a decline in actual inflation, either (or both) of which would be good news for expectations.

No comments: