Portfolio.hu viewpoint:
In view of the March vote, we believe this "convincing majority" was either 5 to 2 or 6 to 1. Last month four MPC members supported a 25-bp cut and three a 50-bp monetary easing. This time it could have been Csaba Csáki and/or Judit Neményi who joined the camp of more cautious MPC members.

With regard to Hungary’s inflation in the first quarter, CPI turned out "somewhat better" than what the NBH envisaged, Simor said.

He noted that the decline in services and industrial goods inflation was especially favourable.

"We have no reason to assume that inflation will not be around our target [3.0% +/- 1ppt] this year and will not drop to below our goal next year," Simor said.

Hungary’s risk perception has improved greatly over the past few months, perhaps even more than elsewhere in the region, the Governor said.

On the other hand, the Greek crisis makes investors wary and the situation does not seem to be resolved yet, he added. The Greek woes, however, have not affected local markets yet, which also helped improve the country’s risk assessment.

Simor reiterated that further rate cuts will be possible if the risk perception allows.

Open towards the new government

With regard to the change of government awaiting Hungary (as centre-right Fidesz mustered a two-thirds legislative majority on Sunday, crushing the ruling Socialist Party), Simor said the central bank’s tasks do not change.

Fidesz has often slammed the central bank and has been especially critical of Simor.

"The National Bank of Hungary has clear objectives that are laid down in law. These - price stability and a low inflationary environment - span through governments and government cycles," Simor stressed.

Simor said the central bank will continue to support the government’s economic policy provided that it does not put the bank’s objectives in jeopardy.

Simor declined to comment the issue of a potential merger of the NBH and the financial markets supervision (PSZÁF).

"We have conducted these discussions last year [with the current government] and we would be happy to have these talks with the new government, as well," Simor said.

At an international press conference today, Fidesz President Viktor Orbán said they would like to be "proud" of institutions such as the PSZÁF and the central bank and their respective leaders. The central bank, he said, should not "serve as the lodging for offshore knights", referring to Simor, who had been in the centre of media attention and a constant target of criticism by Fidesz last year for his ownership of a Cyprus-based company.

Simor played down Orbán’s remarks by saying that these "belong to the world of politics and I do not wish to comment on these."

He said the NBH will continue to do its job and he will do so too until his mandate expires (on 3 March 2013).

C.bank intervention possible?

To a question whether the NBH will consider FX market intervention to tame possibly sharp HUF gains, Simor said the bank "has never excluded the possibility of direct intervention, but we believe that the main tool of monetary policy is interest rate policy. This is via which we attempt to react to changes the macroeconomic and inflation outlooks dictate us."

To a question what situation would prompt the NBH to intervene, Simor replied: "The central bank has no specific exchange rate targets, but it does have an inflation goal and there are exchange rate levels that the NBH considers incompatible with economic fundamentals or price stability. There is a pace for exchange rate changes that it considers unhealthy. These are the pivotal aspects based on which the central bank decides on a potential intervention on the FX market."

Source: Portfolio Online Financial Journal