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Economists say weaker forint has less impact on inflation

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A weakening forint is generating much less inflation now than it was before the 2008 global crisis, György Molnár and Barnabás Virág, economists at National Bank of Hungary (MNB) said, according to a report from Reuters yesterday.

“The currency correlation is a key consideration for central banks that target inflation, including Hungaryʼs” the economists, said in a study published in the MNB’s official website. “A weakening of the local currency lifts inflation in theory, partly by making imported goods more expensive. But even though the forint has shed more than 4 percent against the euro since mid-2013, Hungarian inflation has been near zero for almost two years.


The central bank lowered its base rate to 1.5% on Tuesday in its fourth 15-basis-point cut in as many months. It also flagged a further ʼslightʼ easing, saying inflationary pressure would remain moderate,” according to Reuters. "We expect in the long term that the inflation impact of the forint/euro exchange rate will remain below the value that was typical before the crisis," the economists said.

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