London investment consultant Merrill Lynch advises the National Bank of Hungary (MNB) against increasing the base interest rate, because it may be a “worse than optimal” solution, Merrill Lynch announced.
The Hungarian currency is not influenced by global trends, but by unique factors of speculative nature, thus Magyar Nemzeti Bank (National Bank of Hungary) has an “arsenal” of several options at its deposal to protect the national currency other than a base rate hike, Merrill Lynch said. One of these methods could be a direct market intervention, modifying the Ft/EUR trading band or abolishing it altogether. The EMBI bond index, the VIX index that measures market volatility or the USD/JPY exchange rate did not decline so much recently that would give a fair reason for the recent sales trend in the Ft and bond market, the analysis said. The main reason of slow economic processes is the recession of domestic demands and the interest rate is already too high for the current business period, Merrill Lynch said. (Gazdasági Rádió)