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MNB dep gov to propose another 15 bp rate cut in July

Barnabás Virág, who was appointed a National Bank of Hungary (MNB) deputy governor on Tuesday, has said he will propose another 15 bp rate cut at a monthly policy meeting of the central bankʼs Monetary Council in July, state news wire MTI.

Image by Jessica Fejos

Speaking on public radio early Friday, Virág said a base rate of 0.6% would be appropriate to support the economic recovery after the coronavirus pandemic and there should be no further cuts.

"Itʼs not an option and not a possibility to go under this level," he said on Kossuth Rádió.

The Monetary Council decided on Tuesday to cut the base rate by 15 bp to 0.75%, but called the measure "symbolic" and "discrete", spelling out that it was not the start of an easing cycle. The rate had stood at 0.9% for a little more than four years, even as the Council used other tools to "fine-tune" monetary policy.

The councilʼs next policy meeting is scheduled for July 21.

Virág said MNB is following a strategy that differs from those of other central banks in the region: it wants to maintain a "safe distance" from the area around zero.

He added that the chance to bring forward planned government investments as well as the impact of the MNBʼs Bond Funding for Growth Scheme and Funding for Growth Scheme Go! credit programs give reason for optimism concerning Hungaryʼs economic recovery.