In order to meet its 2008 inflation target Hungary will have to raise rates further, central bank (NBH) Governor Zsigmond Járai said two days after the bank tightened by 50 basis points to 7.75%.
"We have little chance to meet the 3% inflation target by the end of 2008. We need to increase interest rates until we can meet the inflation goal," Reuters cited Járai as telling a business conference late on Wednesday.
"If monetary policy will remain as tight as now and fiscal policy remains on the planned course, we have a chance that inflation will stay below 4 percent (in 2008)," he added.
Járai said inflation could peak at 8% in 2007. The government's target set in its new convergence report, which also won the backing of the European Commission this week, is an annual average inflation of 6.2% for next year.
Járai has once again criticised the government's plans to slash the budget deficit to 3.2% of GDP in 2009 from an expected 10.1% this year, saying that tax hikes would put the economy on the wrong path.
He said the current euro convergence plan was inadequate and that the government, which faced violent demonstrations last week, had not shown sufficient political courage.
"A good convergence programme would cut spending and this is a question of political determination. The deficit is caused by too high public sector wages, state bureaucracy and higher than affordable pension payments," Járai said.
Charting is displayed using TradingView's technology, a platform, where you can build advanced charts,
spot upcoming trends in the stock screener, and find inspiration in multiple trading ideas
