23 June 2008

1  At its meeting on 23 June 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 continues to be subdued and inflation has been falling slowly over recently. The negative output gap may help to reduce inflation on the horizon relevant for monetary policy, while inflation expectations potentially becoming stuck at a high level, as well as the global rises in food, commodity and energy prices are contributing to upside risks to inflation.

Faced with the deteriorating outlook for inflation, the Monetary Council decided to tighten policy at its previous three policy meetings. The latest information has confirmed that there continue to be risks to meeting the inflation target. But, also taking into account the tightening in monetary conditions, the latest data have not altered the central inflation projection in the May issue of the Quarterly Report on Inflation. Based on recent private sector wage developments, it is too early to draw a firm conclusion about the disciplinary effect of the fall in demand.
The Council remains clearly committed to achieving the 3 per cent inflation target. It is making efforts to prevent a rise in longer-term inflation expectations and believes that tight monetary policy should be maintained to reach this goal.

However, the Council will stand ready to tighten policy further, if meeting the target warrants it.

3  The abridged minutes of today’s meeting will be published at 2 p.m. on 11 July 2008.