Hungarian rates remain on hold, but more unconventional measures on the way

By bne IntelliNews January 26, 2016

Hungary’s central bank held the benchmark interest rate at a record low of 1.35% at its monetary policy meeting on January 26, despite a slowing economy and inflation stuck well below target. However, rate setters raised their dovish tone and suggested unconventional measures to further loosen policy are on the way.

The move to hold rates was widely expected, and is in line with the central bank’s guidance that it will keep monetary conditions loose for an extended period, but plans no move for the benchmark. That has been the message since the Magyar Nemzeti Bank (MNB) ended its latest easing cycle in July.

In the statement accompanying the decision, the rate setters retained their dovish tone, reaffirming forward guidance that rates will likely stay on hold until the end of the current forecast horizon; i.e. the end of 2017. They mentioned, however, that the use of unconventional measures to achieve the inflation target is likely to continue.

“The Monetary Council constantly monitors whether the resulting looser monetary conditions ensure the sustainable achievement of the inflation target. In this context, the Council closely examines developments in the foreign monetary environment, particularly the measures of the European Central Bank. If the Monetary Council considers it necessary, further monetary loosening will be implemented, primarily using the existing unconventional tools,” the statement reads.

Even though inflationary pressures are starting to build up within the economy – CPI accelerated to 0.9% y/y in December from 0.5% a month earlier – the resumed fall in oil prices will continue to weigh on the index. That is raising expectations that the MNB might embark on more rate cuts.

“This scenario may prevail at the earliest in 2Q16, after the ECB announces further easing measures, and additional light is shed on the steepness of the Fed’s policy rate trajectory in March,” note analysts at Erste. “In this case, we see room for 30-40bp worth of cuts. Therefore, the base rate can be cut to 0.95-1.05% in 3-4 steps.”

Related Articles

Speculation over a second downgrade grows as S&P drops outlook on Polish economy

Speculation that Poland could suffer a second downgrade of its sovereign rating at the end of the week intensified on January 10, as Standard & Poor’s lowered its estimates on economic growth. ... ... more

Head of Belarus' largest bank dismissed amidst corruption scandal

Sergei Pisarik has been dismissed from his post of chairman of the board at the largest bank in Belarus, state-owned Belarusbank, the lender's media office reported on December 21. ... more

Privat investigations: PrivatBank lending practices threaten Ukraine’s financial stability

The problems at PrivatBank, co-owned by oligarchs Igor Kolomoisky and Hennady Boholyubov, have forced the Ukrainian government to nationalise the country’s largest commercial bank, putting an ... 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