Hungarys rate setters divided on keeping interest rate flat at July meeting .

By bne IntelliNews August 9, 2012
The members of the Monetary Council (MC) of Hungary's central bank were divided on whether to keep the base interest rate at 7% at its latest meeting on July 24, the minutes of the meeting revealed. Five of the members, including the banks governor Andras Simor, voted for no change, while two rate setters wanted a 25bps cut. The central bankers agreed that Hungary's risk premia weakened partly due to the European Central Banks (ECB) decision to cut interest rates and the pick-up in capital inflows to emerging markets as a result of the low external interest rate environment. Moreover, expectations about the negotiations with the IMF and the EU had also exerted downward pressure on premia. However, some central bankers noted that the fall in risk premia might remain volatile, considering that global factors had been the largest contributor to this decline. By contrast, other members judged that there had been a significant improvement in Hungary risk perception, which is expected to continue. Similarly, rate setters remained divided over the contribution of the monetary policy stance to economic output. The majority of MC members agreed that signing an agreement with multilateral financial institution is of a key importance for sustained reduction in the risks associated with financing the governments debt.

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