Magyar Nemzeti Bank Eases Again and Signals likely Further Monetary Relief Next Year

December 17, 2013

Hungary’s two week deposit rate was at 7.0% prior to August 2012 when a string of reductions began, and it has continued to now with today’s announcement of a 20-basis point cut to 3.0%.  The statement concludes with the following summary of reasons for easing and forward guidance that such is likely to continue.  Each of the last five monthly cuts has been 20 bps in size.

In the Council’s judgement, there remains a significant degree of unused capacity in the economy and inflationary pressures are likely to remain moderate over a sustained period. Global financial markets continue to be volatile. A sustained and marked shift in perceptions of the risks associated with the Hungarian economy may influence the room for maneuver in monetary policy. The projection in the December Report implies that further policy easing is likely to be required in order to deliver price stability in the medium term. Considering perceptions of the risks associated with the economy as well as the improvement in the pace of economic growth, further easing of monetary policy may follow, but a reduction in the increment is likely to be warranted in the future.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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