Macro data disproves reasons for rate rise, says ministry

Recent macroeconomic data for Hungary as well as the position of the general government balance disprove the arguments given for a rate rise by the National Bank of Hungary on Monday, the National Economy Ministry said late on Monday.

The central bank’s latest difficult-to-explain rate rise could cause a hang up in Hungary’s economic consolidation, the ministry said.

The NBH’s Monetary Council decided to raise the central bank’s key rate by 25bp to 5.75pc at the meeting on Monday, citing high inflation expectations because of “persistently” higher-than-targeted inflation and higher food prices. The Council also said companies paying recently introduced “crisis taxes” were likely to pass some of the cost on to consumers, creating further inflationary pressure.

The ministry said there was no evidence for the crisis taxes showing up in consumer prices. The government has the tools necessary to prevent businesses from passing on the burden of the tax, it added.

The government sees inflation falling from 4.5pc in 2010 to 3.5pc in 2011, the ministry said.

The Council raised rates at its monthly rate-setting meeting in November for the first time since the autumn of 2008. Shortly after the decision was announced, the ministry called the rise “unjustified” in light of current economic trends.