Magyar Nemzeti Bank Does Another Rate Cut of 15 Basis Points to Record Low of 1.50%

June 23, 2015

In the two year through July 2014, Hungary’s central bank policy rate fell 490 basis points to 2.10%.  After an 8-month hiatus, easing resumed this past March.  The key rate including today’s cut has fallen by 15 basis points after the last four consecutive monthly meetings of Hungary’s Monetary Council.  A statement today signals that “the medium-term achievement of the inflation target points to the direction of further, slight easing of the policy rate.”  Inflation moved recently above zero but will remain significantly below the 3% target in the near term and not return to target until the end of the forecast period.  Weak global growth with subdued rates of inflation continue.  As for Hungary’s economy, today’s statement notes “a degree of unused capacity in the economy” and opines that “inflationary pressures are likely to remain moderate. The real economy is likely to have a disinflationary impact at the policy horizon, and the output gap is expected to close only gradually.”  However, the statement counterbalances such with “the risk of second-round effects materializing due to excessively low inflation expectations has moderated.”  This signals that most, but not all, of the rate reduction in this easing cycle has now probably been completed.

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

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