No Change Made to Hungary’s Central Bank Base Rate

July 26, 2016

Officials at Magyar Nemzeti Bank have used the opportunity of persistent, extensive unused capacity and a lack of pricing pressure to loosen monetary progressively.  Their main interest rate was reduced 490 basis points to 2.1% during the two years ending July 2014.  Five additional 15-basis point cuts were done last year at successive meetings from March through July, and three more such cuts were done when economic growth faltered temporarily early this year.  The rate is now at 0.90%, a record low, yet inflation of zero remains well below the 3.0% target.  Today’s released statement observes that growth is picking up again and predicts continuing moderate inflation but with a gradual uptrend that will arrive near the target in 2018.  With such a backdrop, many analysts are speculating that the cycle of falling central bank rates may still not have run its full course.  In any case, officials two weeks ago unveiled a modification of the rules governing the three-month deposit facility intended to promote bank lending and thereby loosen monetary conditions.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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