Figures published last week, in particular the poor GDP structure and higher
than expected current account and budget deficits, had a negative impact on
bonds and on the exchange rate of the forint. These indicators are strong
arguments in favour of tightening monetary policy. The weakening forint
would also require the decisive step of a hike in rates.
It is therefore
little surprising that the Monetary Council of the NBH hiked its two week
deposit rate by 50 bps to 9.50% this Monday afternoon. The reasons stated
were the weakening forint, the risk of inflation exceeding target as well as
the expected acceleration of economic growth in 2002 and 2003.
In our
opinion, further hike cannot be excluded, if the forint fails to recover in
the near future.
Jakub Dvorak, Investment Research, CSOB