Hungary's Monetary Policy Left Unchanged

April 20, 2009

The Magyar Nemzeti Bank retained a 9.5% benchmark rate as expected.  Typical of other European economies, GDP growth has tumbled (-3.9% at a seasonally adjusted annual rate in 4Q08), and inflation has declined appreciably from 6.7% in in the year to March 2008 to an in-target 2.9% in the year to March 2009. However, the Hungarian forint depreciated some 28% over the past twelve months, and officials are reluctant to expose the currency to more selling pressure.  A statement was released that warned of more pronounced import price inflation associated with exchange rate losses.

To secure an IMF-engineered loan package, the central bank raised its key rate by 300 basis points last October 22nd but subsequently cut such by 50 basis points each on November 24, December 8, December 22, and January 19.  That was the last time monetary policy was changed.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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