Magyar Nemzeti Bank to Keep 2.10% Interest Rate for Extended Period

September 23, 2014

Hungary’s monetary policy rate was lowered after every monthly Council meeting from August 2012 through July 2014, falling to 2.1% from 7.0%.  The statement accompanying July’s 20-basis point cut proclaimed that the easing cycle had ended.  The new policy mantra, reiterated in today’s policy statement, pre-announces that the 2.1% rate will likely be retained for a long time: “with the easing cycle finished, maintaining the current low level interest rates for an extended period ensures the achievement of the Bank’s medium-term inflation target and a corresponding degree of support to the real economy.”  Inflation is currently running at around zero percent, and officials aim to lift such toward 3% by the second half of their policy horizon.  That statement envisages continuing positive growth “despite slightly weaker external demand.”  A wild card that monetary officials are monitoring concerns elevated financial market instability: “International investor sentiment has been volatile in the past quarter, mainly reflecting the escalation of geopolitical conflicts, uncertainty surrounding an interest rate increase by the US Federal Reserve, the interest rate reduction by the European Central Bank and its additional monetary policy measures.”

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



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