The interest rates in Hungary remain unchanged. At its March meeting, the central bank decided with an overwhelming majority to keep rates on hold, but 25 bps hike and 25 bps cut were also discussed. The MNB still believes that the inflation target is achievable in 2013, although the latest CPI data has somewhat increased inflation risks.
The inflation projection for this year was revised to 5.6 pct. from 5.0 pct.; the projection for 2013 is 3.0 pct. (previously 2.6 pct.). GDP growth is seen at 0.1 pct. this year and 1.5 pct. next year, which is only a marginal change compared with the previous projection.
Governor Simor said that the new CPI report counted with stable rates for several more quarters to ensure the inflation falls to target. However, he also said that a rate cut was possible if risk assessment improves and the CPI outlook does not worsen. An important factor for the risk assessment is whether the government reaches agreement with the IMF/EU.
The MNB meeting result is in line with expectations. It has confirmed that the outlook for rates is stable. A cut is unlikely until the IMF/EU deal is reached and there is evidence that inflation eases.