Hungary’s government still wants to introduce one more Vice President to the Monetary Council.
The Hungarian central bank decided to keep the base rate unchanged at 7.00% for the 5th month this year and the Governor said that the MPC also discussed the possibility of a rate cut. We suspect the latter came from Mr Cinkotai who has been voting for a 25bps rate reduction in the last three meetings. Markets generally welcomed the news and the forint reacted positively. This may be attributable to the relatively hawkish language of the Governor, who said that underlying inflation developments has to be carefully monitored. He also mentioned that the Council has to weigh not just the inflation outlook, but the volatile risk premium of Hungarian assets, which mainly depends on the status of the IMF talks.
Here the Government looks to defend its position to introduce one more Vice President and delegate the operational management of the foreign reserves to him. Foreign reserve strategy has already been with the Council, but they may want to grip full control over the process.