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Hungarian report Hungarian report
by Euro Reporter
2010-01-12 07:26:45
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Hungary C.Bank Can Cut Rates Further, Elections May Cause A Pause

“Hungary's central bank (NBH) remains firmly in easing mode but the pace of rate cuts is likely to be slower and the bank may even take a pause in its easing cycle ahead of an election due in April, rate-setter Csaba Csáki told Reuters on Friday. The bank slashed its key policy rate by a combined 300 basis points in five steps before opting for a 25-basis-point cut - the smallest in the current cycle - at its last meeting in December, bringing rates to 6.25%.

It said the country's vulnerability to its high debt and fragility in global markets warranted caution despite a steep economic downturn, which is expected to cut inflation below the bank's 3% target by the second half of 2010. The Monetary Council will hold its next policy meeting on 25 January and MPC member Csaba Csáki - who was not present at the last meeting but supported the decision - said on Friday interest rates could fall still further, albeit at a slower pace.

"I think this (25-bp steps) is a very tangible alternative. I would not rule out bigger steps, but I think this decision (in December) showed that the council had changed gears, at least at that meeting," Reuters cited him as saying. "I do not think that the easing cycle will come to a halt, but my projection is that we will proceed with smaller steps unless there are so many positive changes in the world that would warrant considering even lower (interest rate) levels."

While another 25-bp cut would bring Hungary's base rate to the record low of 6.00% last seen in September 2005, that would be still far above regional peers Czech Republic and Poland where rates stand at 1.00% and 3.5%, respectively. Markets expect Hungary's base rate to fall to a new record low of 5.5% by the end of the year - or 75 bps below the current level - which Csáki said was an "absolutely realistic" expectation. But he said with rates nearing 6.00%, the bank must be more cautious in future decisions, especially given question marks over the economic policies of the next government to be formed after elections due in April.

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Another Union Joins Planned BKV Strike On 12 January



"Suburban railways HEV has joined the January 12 strike call of Budapest public transport company BKV, strike committee chairman Gabor Nemes announced following talks with the company management. Talks on a collective wage agreement and skeleton services bore no fruit, and will continue.

Meanwhile several BKV bus drivers and technical experts were sacked on Wednesday after a special inspection team set up by company management established that they had impeded putting BKV buses into service, MTI learnt from a trade union source. The source said two bus drivers had been fired from the Kelenfold and Obuda garages in south Pest, while several technical experts were also dismissed from their posts. Foreign Liga Unions said it found it shocking that BKV had used a 200-strong team to inspect bus drivers. The union said the BKV method evokes the “era of the Inquisition”.

Nemes said they will provide “all the necessary support” to those fired “because BKV fired them unlawfully”. He added that the inspection team had earlier proved technical problems with BKV buses were real and that several buses rejected by the technical experts had in fact been serviceable. Meanwhile Budapest city council Fidesz-Christian Democrat caucus leader wrote in a letter to Free Democrat deputy mayor Imre Ikvai-Szabo that “if money had not been taken from BKV in wheelbarrows over the past three years on the pretext of consultancy contracts and severance payments, the Ft 2.9 billion required for maintaining the collective wage agreements would have been kept."

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Orbán Advised To Eschew TV Debate


"Fidesz chairman Viktor Orbán’s advisors have warned him against taking part in a televised debate between the prime ministerial candidates, an expert close to the Fidesz leadership told Népszabadság on Friday.

In the official Fidesz drive, which will kick off on March 15, the centre-right party is ex-pected to copy the election campaign of US President Barack Obama. The party will project a message of change and hope and will collect donations from thousands of activists, maintain personal contact with voters, and conduct an intense online campaign, Népszabadság observed. Francois de la Brosse, who ran President Nicholas Sarkozy’s online campaign, met several Fidesz leaders last month."


       
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