Magyar Nemzeti Bank: No Policy Change Likely for Considerable Time Longer

December 16, 2014

In 24 consecutive increments from August 2012 through July 2014, Hungary’s central bank base rate was cut from 7.0% to 2.1%, topped off by a 20-basis point reduction in the final step.  There have now been five successive meetings with no rate change, and today’s statement, which asserts that

  • Inflation in Hungary is likely to be significantly below the inflation target next year, and rise to levels around 3 per cent only in the second half of the forecast period.
  • In the second half of the forecast period, inflation is likely to move in line with the inflation target, reflecting the recovery in activity and the increase in wage dynamics, as the effects of cost shocks fade away. Inflation expectations anchored around the target are likely to ensure that price and wage-setting will be consistent with the inflation target.
  • If the assumptions underlying the Bank’s projections hold, achieving the medium-term inflation target points in the direction of maintaining current loose monetary conditions for an extended period.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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