“There is a strong chance that our December inflation forecast will project a much lower growth outlook,” Pleschinger said.
The central bank in its inflation report in September said it expected growth to slow to 2.5% in 2016 from the 3.2% expected this year, but later third-quarter growth came in at just 2.3%.
“In theory, it is possible that the output gap (between actual and potential economic growth) will close later than at the end of 2017,” Pleschinger told Reuters, adding that the happenings of the coming weeks can draw a clearer picture.
The last policy meeting of the central bank this year is scheduled for December 15, Hungarian news agency MTI reported. Its Managing Director Barnabás Virág told Reuters on Wednesday that the bank could “fine-tune” its monetary easing toolkit next month to counter downward risks to inflation and growth, MTI added.
“If it is indeed the case that there is room for further easing, then there is a good chance that we will look at our targeted non-conventional tools,” Pleschinger told Reuters yesterday.
“With regard to imported inflation, a weaker currency can be beneficial. However… exchange rate movements are no longer so significant,” Pleschinger said, adding that “we have …tools, be it interest rates, or targeted monetary policy tools, that are a lot more effective in ensuring we meet our inflation target.”
“We aim to get the debt yield curve flatter and to bring down longer yields, which can have a bigger impact on the lending channel so that market lending becomes a bit easier,” he added.
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