Hungary’s central bank raised the rate for overnight collateralised loans by 950 basis points to 25 percent from 15 percent, effective 8.45am on Friday, the monetary council said in a statement.
The council also decided to suspend the central bank’s one-week collateralised loan. Barnabás Virág, the deputy governor of the National Bank of Hungary, said the bank had introduced several measures to stabilise the financial markets, on Friday taking direct action to ensure that significant demand for foreign exchange liquidity in connection with energy imports is covered in the next few months.
The central banker said in an online background briefing from Washington that current account items other than energy were positive, and the measure altered substantially supply and demand on the foreign exchange market.
Also, from today a one-day T/N FX swap instrument and a one-day O/N rapid deposit tender will be offered each day at higher interest rates than before, at 17 percent and 18 percent respectively, he said, adding that hopefully these rapid tenders would last “a few days”.
Forint started to strengthen thanks to the decisions of the central bank, szmo.hu wrote. Momentarily, the currency exchange rates are the following:
- 1 EUR is 418 HUF
- 1 USD is 429 HUF
- 1 GBP is 483 HUF
UPDATE (12.23 PM)
Virág said September inflation of 20.1 percent met the bank’s expectations and 85 percent of the month-on-month increase was due to energy prices, while food price inflation was on the back of the extreme summer drought. He said the bank expected the rate of inflation to increase somewhat in the coming months before gradually flattening to a peak.
The current account deficit is bigger owing to the energy component, but other items are in surplus, and the surplus is increasing month on month, he said. Addressing monetary policy, Virág said the stock of one-week deposits had fallen by less than a third, while more than half of the liquidity is in long-term deposits. The bank’s policy, he added, was to guarantee price stability, and maintaining market stability was an important aspect of this. The worsening international environment, he said, was behind the weakening of forint seen in the last two weeks.
Read also 500HUF/EUR is closer than you think!
Source: MTI
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2 Comments
The effect will last for 2 days just like after they increased the Interest rate.
This DOES appear to be – a High HIGH Risk – Economic decision and strategy.
Quite mindboggling really, when you look at the BIG picture of the Collapsing Hungarian Economy.
Dislike the word DESPARATE but this decision, needs MASSIVE economic fundamentals to reverse present downward trends – and REVERSE somewhat IMMEDIATLEY – for it to RESERECT – have a stabilizing effect/impact – on the ailing, sickening Hungarian Economy.
It could be seen as a last-ditch attempt, to “flippantly” – bring about a very “short-term ” written in pencil only, why waste ink, stabilization measure – in the “Crumbling” downward Trending Hungarian Economy.
Its HIGH Risk, and the HIGH probability of FAILURE sadly outweigh it having any sustainable Economic & Financial impact/effect on the “collapsing” Hungarian Economy.