ADVERTISEMENT

Hungary central bank continues easing cycle

Interview

The National Bank of Hungary's Monetary Council decided at a meeting on Tuesday to cut the central bank's base rate by another 25bp to 5.50%, continuing an easing cycle started in August.

The reduction, which was in line with market expectations, was the sixth one in a row. Speaking at a press conference after the meeting, MNB governor András Simor said the Council voted on two options: one to keep the base rate on hold and the other to cut it by 25bp. The latter proposal was supported by a "narrow majority", he said.
At the previous five meetings, the Council's four external members outvoted the three internal members to further loosen the MNB's monetary policy, showing a clear rift over the degree to which weak domestic demand can keep inflation down.
In a statement published after the meeting, the Council said the central bank's mid-term 3% inflation target could be met, citing the margin of spare capacity in the economy, the disinflationary effect of weak demand resulting from cost shocks and the limited degree to which producers can pass on higher costs to consumers. The favourable environment on global financial markets and the government's commitment to achieving a low budget deficit could continue to lower the risk premium on Hungarian financial assets, it added.
These conditions justify and make possible a "cautious easing" of monetary conditions, the Council said. "The Council will only consider a further reduction in the policy rate if the medium-term outlook for inflation remains consistent with the bank’s 3% target and the improvement in financial market sentiment is sustained," it added.
The Council also appeared to address in the statement concerns voiced by some that the central bank could launch unconventional measures after the mandate of its governor and deputy governor expire in March. The Council stressed in the statement that monetary policy instruments it has at present "allow enough room for manoeuvre to maintain a monetary policy stance consistent with the current outlook for inflation and the real economy". It added that, in Hungary's situation, "expanding the range of unconventional policy tools may provide effective support only during times of acute financial market stress". Simor said this was the unanimous opinion of the Council when asked whether the body's stand on the matter was as divided as its stand on rates.

ADVERTISEMENT

Czech economic confidence weakens in October Analysis

Czech economic confidence weakens in October

Parl't votes to phase out savings coops integration framewor... Parliament

Parl't votes to phase out savings coops integration framewor...

Roche Szolgáltató appoints P&C business partner lead Appointments

Roche Szolgáltató appoints P&C business partner lead

Budapest airport shuttle bus service expanded City

Budapest airport shuttle bus service expanded

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.