Hungary cenbank hikes rates 50 bps to 8.00 precent

                                                                                         

The National Bank of Hungary (NBH) has raised its base rate by 50 basis points on Monday, more than the consensus forecast (25 bp) of analysts in a Portfolio.hu poll, where only 6 out of the 17 respondents expected a larger interest rate raise.
The MPC had cut the base rate from 8.00% to 7.50% last June.

The larger-than-expected hike by the cenbank may signal its strong commitment to meeting its medium-term inflation goal (3%), and that the MPC wanted to “get over with" the rate hike pressure with a single big step.

It is not net clear as yet whether the MPC considered in its decision the medium-term impacts of the political tension between the governing coalition parties that took a drastic turn over the weekend and on Monday.

The dysfunctional operation of the fixed-income market has increased chances for a 50-bp tightening, as yields have been rising sharply even amidst continuously rising forecasts for the end-2008 inflation and a worsening growth outlook.

Among others, risks to food and energy prices and wages could push CPI higher, and the MPC could have taken a proactive approach to fend off such risks.

Global money and capital market turbulence is keeping the asset prices of the Hungarian economy, which is still struggling with balance problems, fragile. The MPC could have also taken into consideration domestic political turbulences.

About the author:
Rony Grynholc is the President Chamber of Commerce Israel-Hungary.

Article Source: http://www.Free-Articles-Zone.com