Actual base rate: 7.00 %
Consensus: 7.50 %
Previous: 7.00 %
The Hungarian central bank has left interest rates unchanged after a tight vote. The options discussed were ´hold´ and ´50 bps hike´. The MNB says that the risk of a second-round CPI spillover is low due to the weak domestic demand. The bank believes that the CPI target can be met in the first half of 2013. Moreover, the rate decision was likely influenced by a somewhat better risk assessment and the forint that reversed the negative trend from the end of last year. The MNB seems to count with further improvement after the deal with the IMF and the EU is reached. However, the bank repeats that further rate tightening may be needed should the risk assessment and CPI outlook deteriorate significantly.
As a 50 bps hike was expected by the market, the rate decision is negative for the forint. The monetary tightening may still come, especially if the forint fails to keep its short-term gains and the government discussion with the international institutions drags on.