Central Bank of Hungary

April 25, 2017

At this month’s meeting of Hungary’s Monetary Council, officials left interest rates including the 0.90% Base Rate unchanged as expected. The rate was slashed from 7.0% prior to August 2012 to 2.1% over the ensuing two years, reduced by a further 75 basis points in March-July of 2015 and again by 45 basis points in three 15-bp steps last year in March, April and May. There have been no changes since the reduction in May 2016, and a statement released after today’s meeting implies continuing status quo for the time being.

The statement projects 3-4% economic growth “over the coming years, to which the Bank’s and the Government’s measures to stimulate economic growth contribute substantially.” Quickening domestic demand will reduce the current account surplus “significantly.” Headline inflation will be more volatile than core inflation and to reach 3% “consistent with price stability in a sustainable manner from the first half of 2018.” CPI inflation slipped to 2.7% in March and is liable to ease further in the very near term.

Officials aren’t ruling out additional stimulus via channels other than the interest rate. “A watchful approach to monetary policy is still warranted due to uncertainty in the global financial environment. …If inflation remains persistently below the target, the Council will stand ready to ease monetary conditions further using unconventional, targeted instruments.”

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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