Yesterday's key point was the press briefing of PM Mr Orban about the talks with the troika. He said that the deal is not yet within close range, but added that situation is more encouraging. The most burning issue is the government’s proposal to tax financial transactions of banks including these with the central bank and the state treasury. ECB criticised it because it would hurt the central bank independence. The IMF and the EC have not yet said anything. Most recent comments from the chief negotiator of the Hungarian government Mr Varga suggested that talks may end at the end of the autumn and that Hungary could stick to the transaction tax, while the IMF/EU would like to see further cuts in public workforce.
Meanwhile, Czech central banker Lizal said that the central bank would probably revise the estimate of GDP growth to the downside at its meeting next Thursday.Lizal also suggested that if GDP was revised down, there would probably be also a downward revision of interest rates trajectory. However, he obviously does not expect any significant changes from the previous inflation report. Moreover, he added that weaker than expected koruna’s exchange rate clouds the outlook for further cuts. In our base scenario, we expect that interest rates will remain unchanged at 0.5 percent throughout the rest of this year. Hence there is space to price out a rate cut in the Czech FFRA market.