"While some analysts believed the breakdown of talks between Hungary and an IMF/EU delegation may lead to a rate hike, the central bank’s (NBH) Monetary Council has on Monday decided to keep its base rate on hold at 5.25%, in line with the consensus forecast of analyst.While the key policy rate remained unchanged, a lot of things have become different since the weekend. The MPC is almost certain not to mention the possibility of further rate cuts in its official statement due out at 15:00 CET. Moreover, it is likely to emphasise not only financial stability aspects but also that if needed the central bank will not hesitate to take the benchmark rate higher.
In this sense, the NBH is definitely in a tough position since under law it must support the government’s economic policy. But it is most unlikely to make such a statement. But then it should point out that the cabinet’s manoeuvres are putting financial stability in jeopardy. In this case, the friction between the bank band the government would increase further. Therefore, we believe, that even if the MPC decides to criticise the government it will do so in a cautious, less explicit way.
The NBH will issue an official statement at 15:00 CET, the same time Governor András Simor will start a press conference on the background of the rate decision. Portfolio.hu will report live on the event."
Source: Portfolio Online Financial Journal
20.07.2010