Hungarys central bank may raise rates further - minutes.

By bne IntelliNews January 12, 2012
The monetary council of Hungarys central bank is ready to further tighten the monetary policy by raising twice the base interest rate by 0.25pps each at the first two policy meetings in 2012, minutes from the latest rate-setting meeting showed. The central bank raised the base rate by 0.5pps to 7% on December 20. The central bankers broadly agreed on tightening the monetary stance, with 5 members in favour of a 0.5pps hike and 2 members backing a 0.25pps increase. According to the board members, the outlook for Hungarys economic growth had clearly worsened in the last months on 2011. The sharp deterioration in external demand conditions reflected an economic slowdown in the countrys main trading partners. At the same time, the outlook for consumption determining domestic demand was likely to be weak as a result of the governments austerity measures, the statement read. Under the banks projections, local economy is seen to stagnate (0.1% GDP growth) in 2012, while recovery is expected in 2013. The bank projects a 5% inflation in 2012, making a substantial upside revision of its September forecast that envisaged a 3.9% inflation, reflecting the upward cost pressures from the indirect tax increases and the substantial depreciation of the forint. However, some members of the council noted that declining household demand would have disinflationary effect. Finally, the central bankers welcomed the establishment of connections between the government and the IMF. The next policy meeting will be held on January 24.

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