Balog said that Hungary’s vulnerability to external market forces has “decreased markedly” since mid-2012 when base rate cuts began. “I believe that based on Hungarian inflation expectations, and our inflation forecasts,” said Balog, “there is room for a further reduction in interest rates, which could go as low as 2.5%.”
London analysts: Key rate could go to 2.1%
Hungary’s central bank is likely to end its ongoing monetary easing cycle at a terminal policy rate of just above 2%, economists with London-based BofA Merrill Lynch Global Research postulated yesterday as part of a report on the country.
The report concluded in part that “We cut our forecast for the policy rate to 2.25% by May, expecting the Monetary Policy Council [MPC] to shift to 15 bp monthly cuts (though 10 bp per month is also a possibility).”
The Merrill Lynch group also made note of the new conditions on the central bank’s Funding For Growth scheme: “we originally thought the MPC would actively use to stimulate borrowing quickly, [but] the experience of the last few months shows the Council is keen to [reserve this] for higher credit quality SME borrowers, largely for new investment.”
— material from MTI was used in this article
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