Actual base rate: 7.00 %
Consensus: 7.00 %
Previous: 6.50 %
The Hungarian central bank has lifted interest rates by another 50 bps in a repeat of the last month´s hike.This result of the monetary meeting was expected. The bankers discussed about a 25bps and a 50bps hike. Once again, the central bank has mentioned that further monetary tightening might be needed.
The bank has further decreased its GDP projection for 2012 to 0.1 pct, in 2013 they expect the economy to grow by 1.6 pct. On the other hand, inflation is expected higher, it should mount to 5.0 pct in 2012. The inflation target is seen achievable in early 2013.
The weak forint stands behind the worse CPI outlook and remains an important risk for inflation. Moreover, it is also a risk for the financial system. With the higher rates, the MNB decides to support the currency and to prevent money outflow from the country. Due to the risks, the central bank cannot support economic activity by looser policy. Risk assessment will depend on developments in the Eurozone but also local issues will have influence. The new central-bank law and the suspended talks with the IMF are currently negative factors for the forint. If politicians do not deal with these issues, another hike may come.