Hungary’s central bank to continue easing cycle
Budapest, March 23 (MTI) – Hungary’s central bank (NBH) will cut the base rate until it reaches a rate that is consistent with its inflation target, NBH deputy governor Márton Nagy told journalists on Wednesday. The bank wants to keep rate the key rate low for a sustained period, he said.
The NBH’s inflation target is 3 percent in a +/-1 percentage-point tolerance band.
The forint weakened after Nagy’s comments, easing against the euro from 311.69 at 8am to 312.60.
Nagy’s comments came after the NBH cut the key rate by 15 basis points to 1.20 percent in a surprise move on Tuesday. The NBH halted its previous easing cycle in July 2015.
He said the bank wanted to surprise markets by launching a new easing cycle.
A second cut will certainly come, Dow Jones cited him as saying. The question is whether a third or fourth will follow, he said, adding he personally preferred 15 basis points reductions.
Nagy said the inflation forecast in the new quarterly Inflation Report, under which inflation will reach the +/-1 percentage-point 3 percent inflation target only in the first half of 2018, leaves ample room for further easing.
In a move likely connected to Tuesday’s rate changes, Nagy announced that the NBH wants to make the BUBOR market active to aid monetary policy transmission, noting that the BUBOR at present does not live up to its role of a reference rate.
The central bank agreed with the 12 biggest banks to make a market in one-month and three-month interbank reference rate BUBOR starting May 1, he said, adding that the NBH will review the developments by the autumn.
Source: http://mtva.hu/hu/hungary-matters
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