21 July 2008

1     At its meeting on 21 July 2008, the Monetary Council reviewed the latest economic and financial developments and left the central bank base rate unchanged at 8.50%.

2     The Council maintains its view that Hungarian economic growth has remained subdued and inflation has been falling at a slow rate over recently. The negative output gap may help to reduce inflation on the horizon relevant for monetary policy. In contrast, inflation expectations potentially becoming stuck at a high level, as well as the global rises in food, commodity and energy prices are adding to the upside risks to inflation.

Data received over the past two months reveal that inflationary pressures have increased due to rising oil prices and diminished due to the strengthening of the forint exchange rate. The Monetary Council does not seek to prevent the adjustment of the relative prices of energy consistent with shifts in global supply and demand; however, it seeks to prevent this process from resulting in persistent inflationary pressures. The latest inflation and wage data are consistent with the central path in the May issue of the Quarterly Report on Inflation.

The Council remains committed to achieving the 3 per cent inflation target. Tight monetary conditions help to bring down inflation gradually and to reduce indirect potential inflationary pressures from expectations.

The Monetary Council will stand ready to take the necessary steps, if meeting the inflation target warrants it.

3     The abridged minutes of today’s meeting will be published at 2 p.m. on 15 August 2008.


Monetary Council