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Morgan Stanley: Funding for Growth scheme efficiency key to Hungarian economy in 2014

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Analysis from Morgan Stanley economist Pasquale Diana released yesterday reveals the investment advisory’s take on recent cutbacks in the base rate by the National Bank of Hungary (MNB). The analysis concluded that MNB’s “expanded plan to boost economic growth with discounted funding to companies will overshadow the interest-rate path in monetary-policy importance next year.”

According to Diana, “It is clear to us that into 2014, the big story for monetary policy is not how much lower the base rate goes from here, but how effective [the Funding for Growth scheme] turns out to be.”

Diana went on the forecast that the key rate will “probably reduce the two-week deposit rate to 2.6% early next year,” well lower than MNB governor György Matolcsy’s forecast of 3%.

The base rate is currently at 3.2% after the latest 0.20% reduction made earlier this week.

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