5 July 2010

At its meeting on 5 July 2010, the Monetary Council reviewed the latest economic and monetary developments. In accordance with its meeting calendar, the Council did not take a decision on the central bank base rate.

The Monetary Council welcomes the efforts of the Government of the Republic of Hungary to maintain budget balance, recognised as a key to preserving investor confidence. However, an issue of concern is that some measures taken to restore fiscal discipline may lead to the build-up of other macroeconomic risks. The amount the Government aims to collect from domestic financial intermediaries by means of a special bank tax may impair the ability of the banking sector to attract capital and its capacity to lend, which in turn may result in significant output loss in the short and long term. The drain on bank earnings through the planned levy may undermine the ability of the domestic banking sector to collect funds and, ultimately, the stability of the Hungarian economy.