Hungarian rate setters offer more dovish noises as they hold rates

By bne IntelliNews October 20, 2015

Hungary’s central bank offered no surprise at its monetary policy meeting on October 20, keeping the benchmark interest rate at a record low of 1.35% amid a renewed return to deflation and a slowing economy. However, rate setters also pushed a dovish message further.

The move to hold rates was widely expected and is in line with the central bank’s guidance to keep monetary conditions loose for an extended period. That has been the message since the Magyar Nemzeti Bank (MNB) ended its latest easing cycle in July.

However, in the statement accompanying the rate decision, the rate setters offered more explicit forward guidance.

“If the assumptions underlying the bank’s projections hold, the current level of the base rate and maintaining loose monetary conditions for an extended period, over the entire forecast horizon, are consistent with the medium-term achievement of the inflation target and a corresponding degree of support to the economy”, the MNB said.

The forecast horizon currently spans to the second half of 2017. The recent return of weakness in inflation clearly prompted the more dovish note in the statement. Hungarian consumer prices sank 0.4% y/y in September, ending a four-month rising streak. CPI is not expected to rise towards the MNB’s 3% target until at least 2017.

“If inflation continues to undershoot the MNB’s forecast, then rate cuts may come back onto the agenda over the next few months," William Jackson at Capital Economics suggests. "For now, though, we are sticking to our long held forecast that the policy rate will remain at 1.35% throughout this year and next.”

Slowing economic growth is also becoming a worry for the MNB, analysts at KBC point out. GDP growth came in at 2.7% in the second quarter, the first time it has ducked under the 3% mark in two years.

Moreover, recent macro figures suggest the slowdown will continue in the third quarter. “The deteriorating economic outlook worries the government and the MNB as well. Although the phrase of central bank’s communication is still the inflationary developments, the decisions are influenced more by the economic developments”, the analysts say.

 

Related Articles

Hungary finally joins the negative yield club

Hungary finally joined the negative yield club on March 21 as Government Debt Management Agency AKK  accepted a bid of -0.01% at an auction of 3-month T-bills. Hungarian yields have been on ... more

S&P improves Russia's outlook to Positive

Standard & Poor's improved the outlook on Russia's sovereign ratings from Stable to Positive, while affirming the 'BB+/B' foreign currency rating and 'BBB-/A-3' local currency rating, the agency ... more

IMF delays new $1bn tranche to Ukraine due to Donbas blockade

Ukraine's main donor, the International Monetary Fund (IMF), has cancelled a board meeting scheduled for March 20 that was expected to see the release of a $1bn tranche to Ukraine, while demanding ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss