Economy
Hungary MPC still stands ready to defend inflation goal - statement
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In line with the forecasts included in the latest quarterly Inflation Report, the Monetary Council maintains its view that the Hungarian economy is characterised by subdued growth and a decline in inflation which is slower than previously expected. Sensing a deterioration of inflation outlook, the MPC decided to tighten monetary conditions both at its March and April meetings.
“Due to domestic and global cost shocks, inflation is moderating at a slower-than-expected pace: at unchanged monetary conditions it could be considerably over the inflation goal in 2009, but- provided that substantial upside risks fail to materialise - it could meet that in 2010."“The output gap is negative on the entire projection horizon, due party to a demand dampening impact of fiscal policy, which - via its restricting impact on corporates' pricing and wage decisions - could help disinflation. An improvement of the external and the internal balance is expected to reduce the vulnerability of the economy."
“However, on the time horizon which is relevant for monetary policy, upside risks remained substantial. Despite the lingering pressure to adjust, the moderation of wage dynamics could be slower than previously expected due to a series of cost shocks. It increases inflation risks if the players of the economy give in to an urge to pass on cost shocks and if rely more heavily in their pricing and wage decision on past inflation than what is assumed in the baseline scenario. This risk would be exacerbated if the recent deterioration of the global inflation environment continued."
“The Monetary Council believes that monetary tightening carried out so far - despite the heavy cost shocks that hit the economy - will help a further decrease of inflation."
“The Council remains committed to the 3.0% inflation goal and wishes to go before the second-round impacts of inflation shocks."
“As it sees that the achievement of the inflation target is surrounded by substantial upside risks on the time horizon relevant for monetary policy, it decided to increase rates."
“The Monetary Council still finds it necessary to maintain tight monetary conditions and is ready to make the necessary steps if the achievement of the inflation goal becomes in jeopardy."
The NBH will release the minutes of today's policy meeting at 14:00 on 13 June.
“Due to domestic and global cost shocks, inflation is moderating at a slower-than-expected pace: at unchanged monetary conditions it could be considerably over the inflation goal in 2009, but- provided that substantial upside risks fail to materialise - it could meet that in 2010."“The output gap is negative on the entire projection horizon, due party to a demand dampening impact of fiscal policy, which - via its restricting impact on corporates' pricing and wage decisions - could help disinflation. An improvement of the external and the internal balance is expected to reduce the vulnerability of the economy."
“However, on the time horizon which is relevant for monetary policy, upside risks remained substantial. Despite the lingering pressure to adjust, the moderation of wage dynamics could be slower than previously expected due to a series of cost shocks. It increases inflation risks if the players of the economy give in to an urge to pass on cost shocks and if rely more heavily in their pricing and wage decision on past inflation than what is assumed in the baseline scenario. This risk would be exacerbated if the recent deterioration of the global inflation environment continued."
“The Monetary Council believes that monetary tightening carried out so far - despite the heavy cost shocks that hit the economy - will help a further decrease of inflation."
“The Council remains committed to the 3.0% inflation goal and wishes to go before the second-round impacts of inflation shocks."
“As it sees that the achievement of the inflation target is surrounded by substantial upside risks on the time horizon relevant for monetary policy, it decided to increase rates."
“The Monetary Council still finds it necessary to maintain tight monetary conditions and is ready to make the necessary steps if the achievement of the inflation goal becomes in jeopardy."
The NBH will release the minutes of today's policy meeting at 14:00 on 13 June.
