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MNB aims to reduce country risk premium - Nagy

The Monetary Council of the National Bank of Hungary (MNB) is committed to reducing the country risk premium paid on Hungarian assets compared to other countries in the region as well as in the eurozone, Deputy Governor Márton Nagy said in an interview published in Mondayʼs issue of business daily Világgazdaság.   

"[MNB policymakers] have committed to improving the relative position of the long end of the yield curve; that is, weʼre reducing the spread between domestic long-term yields and yields in the eurozone as well as the region - the country risk premium - and keeping it there," Nagy told the paper, as reported in a summary of the interview by state news agency MTI.

"The central bank communicates with economic players in a continuous and transparent way that they must be prepared for short-term money market yields and the base rate to remain unchanged for a sustained period of time," he continued. "The base rate may remain unchanged till the end of 2020 and the current BUBOR rates even until the end of 2019. Building this into market expectations reduces long-term yields, too," he added.

Asked whether this might not be "too bold a statement" in view of the direction rates are moving in more developed economies, Nagy said the same had been said about a number of MNB programs over the past five years.   

"In the end, the results justified the Monetary Councilʼs decision in all instances," he concluded.