Analyst: Hungary could cut base rate to 0%, cap forintʼs value
Hungaryʼs central bank could cut the base lending rate to zero, and may be preparing to introduce a cap on the forint this year to keep the local currency from rising too much in value against the euro, according to a “money manager who outperformed more than 90% of his peers”, Bloomberg reports this morning.
Viktor Zsiday of the Citadella Derivative Fund at Concorde Asset Management in Budapest said putting a cap on the value of the forint might be one policy option for the Hungarian National Bank (MNB) if it cuts the base lending rate to zero and does not achieve the desired results.
“Reaching the zero rate this year will only be enough to keep the forint in the 300-315 per euro range ... at that point, they will need to consider their options and may opt to introduce a currency cap,” Zsiday said according to the article by Bloomberg.
The Hungarian forint was remarkably strong in Q1, peaking at 307 to the euro, causing concerns of a deflationary cycle that could see domestic prices fall while the cost of Hungarian exports to the Eurozone rises, Bloomberg reported.
The MNB has said they do not have a target for the exchange rate, but they have been cutting the base rate to spur inflation. Hungary’s main goal is “to keep the forint weakening in order to keep booking a profit on foreign-currency reserves,” Bloomberg quoted Zsiday as saying.
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.