A controversial amendment

Parliament of Hungary passed a controversial amendment to the central bank act. The amendment will raise the number of members on the MNB’s rate-setting Monetary Council from 7–9 to 9–11, and will allow the prime minister to appoint four new members. MNB President Zsigmond Jбrai described the amendment as unconstitutional. The central bank’s 50bp rate cut came as no surprise to analysts. MNB President Jбrai said slowing inflation may permit further rate cuts this year. “I can imagine we will have single-digit interest rates by the end of the year,” he said. Consumer price inflation slowed to 6.3% in October, the lowest this year. The M2 metro may run to Ferihegy Airport by 2010, as part of a Ft 100 billion project, according to 24-hour news radio station Inforбdiу. Representatives of the local municipality, public transport firm BKV Rt, Hungarian Railways (MБV), and Budapest Airport Rt, which operates Ferihegy, discussed the project behind closed doors. The state will guarantee loans to city-owned public transport firm BKV Rt next year, Finance Minister Tibor Draskovics agreed with Budapest Mayor Gбbor Demszky. The Finance Ministry, city council and BKV have not agreed on the upper limit of the guarantee. BKV expects to have total loans of Ft 50 billion by year’s end. The company had losses of Ft 25 billion in 2003. Capitalization of the Budapest Stock Exchange rose from Ft 4,193 billion in July to Ft 4,545 billion in September. The upward trend was largely propelled by foreign investors, who owned 75.4% of all shares in September, up 1% from three months earlier.