Magyar Nemzeti Bank Implements Another Interest Rate Cut

February 18, 2014

Hungary’s base rate has been reduced in increments of 25 basis points over the twelve months to and including July 2013, 20 bps in each of the last five months of 2013, and 15 bps in both January and now February of 2014.  The rate has declined altogether from 7.0% to 2.7%.  And yet, the dollar remains open for further measured cuts according to today’s statement because of significant unused productive capacity and subdued inflation.  “Delivering price stability in the medium term points in the direction of monetary easing.”  On the other hand, note is made that “Perceptions of the risks associated with Hungary and other economies of the region deteriorated, as reflected in rises in CDS spreads and bond yields and higher volatility of the forint exchange rate. In the Council’s judgment, a cautious approach to policy is warranted due to uncertainty related to the global financial environment.”  Hence, the incremental monthly monetary stimulus was throttled back to interest rate reductions of  20 basis points last August and later to ones of 15 basis points at the start of this year.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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