MNB leaves forint base rate on hold

History

The panel discussed only one proposal and the decision was unanimous, MNB governor András Simor told reporters.

 

The MNB predicts that the country's inflation will be over the 3% target laid out earlier, possibly necessitating the current base rate for a longer duration of time.

 

Simor noted that the current strength of the Swiss franc against the forint could become a factor for consumption. At the same time, government measures that led to surplus earnings for households, such as a flat tax rate, the return of yields from the nationalization of private pension funds as well as a rescue package for indebted borrowers could boost domestic consumption.

 

He noted that the findings of a stress test conducted last year – namely that Hungary's banking system is well-capitalized and could withstand even more extreme conditions – still hold valid.

 

He said that Hungary's risk provisions have increased, but this is not ue to the country, since its fundamentals have greatly improved over the course of the past years. Instead, he attributed the change in circumstances to global processes which naturally impact Hungary.

 

Simor said the MNB expects the next two years will see slow economic growth, but unemployment will still be above 10%, with only a sluggish downward trend in sight. He expects that increased activity sparked by government measures to force inactive Hungarians back into the labor market will play a role, as well as employment starting to rise as a cause of economic growth.

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