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Press release on the Monetary Council’s meeting of 10 January 2012

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10 January 2012

In accordance with its meeting schedule, the Monetary Council reviewed the latest economic and financial developments. Sentiment towards Hungarian financial assets has declined significantly in recent weeks, as reflected in an increase in risk premia and the rapid depreciation of the forint exchange rate. These were driven mainly by uncertainty surrounding developments in Hungarian economic policy and the outcome of Hungary’s negotiations with the International Monetary Fund and the European Union. The Monetary Council welcomes the Government’s strong commitment to reach an agreement quickly with the IMF and EU, which has had a positive market reaction. The Council points out that the capital and liquidity position of the domestic banking sector is adequately stable.

The persistent weakness of the exchange rate increases the pressure on economic agents to adjust their balance sheets, leads to a deterioration in the outlook for the economy and inflation and may cause disruptions to financial markets and the banking system. Monetary policy can best support the recovery by maintaining a predictable economic environment, ensuring price stability and preserving the stability of the financial system. If necessary, the Monetary Council stands ready to meet these objectives using the instruments at its disposal.

MAGYAR NEMZETI BANK
Monetary Council