Hungary Gets a Rate Cut for the Eighth Month in a Row

February 22, 2010

Magyar Nemzeti Bank reduced its two-week bill rate by 25 basis points to a 20-year low of 5.75%, the same incremental cut as in December and January.  The previous four months had seen the rate decline by 50 basis points apiece, and an initial easing last July was 100 basis points in size.  A weak exchange rate had delayed the onset of monetary policy easing.  Analysts anticipated today’s move but think the central bank will now pause ahead of April elections.  Hungary suffered a GDP decline of slightly over 6% last year, but inflation is higher than a year ago.  Concerned over exposing the forint to new selling pressure, monetary authorities reduced the size of their monthly rate reductions in December.  Compared to January 25, when the previous easing was announced, the forint is over 3% weaker against the dollar but up 0.6% against the euro.  The Greek fiscal problems come at a delicate time for EMU aspirants like Hungary, which are also trying to reduce their budget deficits.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.