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Reuters: MNB could maintain rates until 2018-2019

MNB

The National Bank of Hungary (MNB) could keep its base rate unchanged at a record low of 1.35% until 2018 or even 2019 , deputy governor Márton Nagy told Reuters today.

Nagy also told Reuters that the central bank is scheduled to announce a set of incentives to boost business lending next Tuesday and it expects to close a deal soon to acquire a majority stake in the Budapest Stock Exchange (BSE) in weeks.

“The base rate can remain low for a sustained period, even in 2018, but I cannot rule out that even in 2019, beyond the policy horizon" of six to eight quarters, he told Reuters. “Negative real interest rates are not just an opportunity but a must,” he said.

“Inflation targeting is the most important, but inflation targeting also allows real interest rates to turn negative, even on a sustained basis … The output gap remains negative, and while the inflation target is achievable, negative real interest rates must be maintained to close the output gap," Nagy said according to the Reuters’ report.

The deputy governor also noted that MNB will offer a set of incentives next Tuesday to boost lending to companies. “This will include the lending stimulus package and details on phasing out the Funding for Growth Scheme,” Nagy said.

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