Budapest, November 8 (MTI) – The National Bank of Hungary is likely to keep its base rate unchanged at 0.90 percent even if other central banks start tightening, the bank’s governor György Matolcsy said in an interview to business daily Világgazdaság.
“We have established and set a base rate for the long term, and even if the [US Federal Reserve] gradually tightens rates and the [European Central Bank] or the Japanese central bank possibly respond we believe that the conditions for the NBH’s loose monetary policy can remain in place until the end of 2017, or even, I believe, until 2018-2019,” Matolcsy said in the interview published on Tuesday.
The central bank’s steps over the past three years to lower interest rates, make cheap credit available to businesses, give banks incentives to buy government bonds and convert Hungarian households’ foreign currency-denominated debt, are responsible for about half of Hungary’s economic growth, he said. Matolcsy added that during the second half of his six-year mandate, the bank does not plan any further lending programmes and will make stability its main goal.
“Now a competitive change is necessary, which is expressly a joint decision of the government and the private sectors. Now they have to make a move,” he said.
Matolcsy underlined the bank’s standpoint that the government should use some of its room for fiscal manoeuvre to make reforms that support sustainable growth of a degree that continue to bring Hungary’s per capita GDP closer to the EU average.
“We’re not recommending overspending but rather the radical continuation of the first and second Szell Kalman [structural reform] plans,” he said, noting the need to reform higher education, scale back bureaucracy and fully adapt to the IT revolution.
He said the government had “started thinking” in these terms, adding that the cooperation between the government and the central bank is “very strong”.
Read the original interview in Hungarian HERE.
Photo: Daily News Hungary