Latest Hungarian Monetary Policy Statement

July 24, 2012

By split decision, policymakers at Magyar Nemzeti Bank agreed to an unchanged Base Rate of 7.0% today.  A released statement projected negative GDP growth this year but also noted that CPI inflation of 5.6% in the twelve months to June exceeded their expectation.  Financial markets remain fragile, and Hungary is vulnerable to fallout from the euro area debt crisis. 

The directional policy bias is to ease but only if and when conditions allow.

The volatile risk environment and above-target inflation for an extended period continue to warrant a cautious policy stance. The Council will consider a reduction in interest rates if Hungary’s risk premium falls persistently and substantially and the outlook for inflation improves.

The last rate change was upward, a 50-basis point hike in December that culminated 175 basis points of tightening in five moves beginning in May 2010.  Fourteen prior cuts had slashed the key rate by 625 basis points from 11.5% to a low-point of 5.25%.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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