Central bank benchmark rate down for 12th consecutive time

Analysis

The verdict is in on the National Bank of Hungary (MNB) main interest rate, and a record low has been announced with the 12th consecutive reduction to the rate. The benchmark deposit rate was reduced to 4% from 4.25% and MNB President György Matolcsy is slated to announce the bank’s “guidelines” for interest-rate policy this afternoon. Matolcsy may also discuss the current position on the “easing cycle,” this last rate cut suggesting its drawing to a close.

Though the forint is down slightly this morning, the past three months has seen an overall 1.6% gain in the currency’s value; Benoit Anne of Societe Generale was impressed enough this month to note prior to the announcement that “The forint has been extremely well behaved over the last month, suggesting that [MNB will continue lowering rates] as close as possible to 3%, possibly even a little lower…”

Anne’s statement seemed to marked a departure from the analyst’s advice of less than one month ago when he said “The recent out-performance [of the forint] is unlikely to be sustainable and is likely to be reversed.” Some are still keeping their optimism cautious, however.

A Financial Times blog noted earlier today that “although the cuts can’t go one forever, the current account surplus buys Hungary some time to kickstart its economy with low rates.”

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