23 April 2007

 1.      At its meeting on 23 April 2007, the Monetary Council considered the latest economic and financial developments and voted to leave the central bank base rate unchanged at 8.00%.

The reasons of the decision are as follows:

According to the assessment of the Monetary Council, the information received during the past month yields a miscellaneous picture as far as the trends of the Hungarian economy are concerned. While the data for the first two months of 2007 confirmed previous inflationary expectations, the latest (March) data have been more ambiguous. During the first quarter, the core inflation component of the consumer price index decreased, which is an auspicious sign as far as the disinflation process is concerned. In March, however, prices of non-durable consumer goods and processed food products increased at a rate higher than expected. More information is required in order to determine whether that increase has been a momentary or a lasting phenomenon.

While, compared to February, the increase of wage payments in the competitive sector has slowed down slightly, the rate has remained relatively high. It is still difficult to assess the rate of the inflation of wages and its consequences with the required precision, since it can be significantly affected by the adaptation to the changes of regulations on the labour market and in taxation and by the rise of inflationary expections.

The interest spread of HUF-denominated government bonds has continued to decrease, a trend that started at the beginning of the year. Apart from the more favourable assessment of the austerity measures of the government, this may have been due to the fact that, in April, investors have been willing to assume higher risks than during the earlier period. The interest rate may be reduced at a later date if the adjudgement of the level of risk by the investor community continues improve and the inflationary trends so permit.

2. The minutes of today’s Council meeting will be published at 2 p.m. on 11 May 2007.

                                                                           Magyar Nemzeti Bank

                                                                                         Monetary Council