Positive prospects: Hungarian forint at a ten-month high
The Hungarian National Bank pushed the forint to a ten-month high. After Tuesday’s interest rate decision meeting, the Hungarian forint strengthened to below 377 against the euro, the strongest level in ten months.
Hungarian forint at ten-month high
The euro was trading at around HUF 378.5 on Tuesday morning, and above 380 during the day, napi.hu writes. At the time of the Hungarian National Bank’s (MNB) interest rate decision, at 2 PM, the exchange rate was around the 378 level.
The central bank left the base rate unchanged at 13 percent at its second rate-setting meeting of the year, as well as the two sides of the interest rate corridor. This was in line with analysts’ expectations. After that, the forint started to strengthen rapidly, trading below HUF 376.5 against the euro, according to TradingView.
MNB leaves base rate on hold
Hungarian rate-setters decided to leave the base rate unchanged at 13 percent at a regular policy meeting on Tuesday. The Council also decided to keep the central bank’s O/N deposit rate at 12.5 percent and the O/N collateralised loan rate at 25 percent.
The rate-setters signalled an end to the tightening cycle at their monthly policy meeting in September, but said tight monetary conditions would be maintained with a focus on sterilising liquidity and improving monetary policy transmission. On October 14, the policymakers announced a decision to launch O/N deposit quick tenders on a daily basis. The central bank has since offered the liquidity sterilisation instrument at a rate of 18 percent.
In a statement released after the meeting, the Council said it was necessary to maintain the current level of the base rate over a prolonged period in order to achieve the central bank’s inflation target in a sustainable manner. The Council said disinflationary effects were expected to increase in the coming months, “causing a turnaround in inflation”. It added that tight monetary conditions contributed to avoiding second-round inflationary effects.
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Prices back to pre-war levels
Energy, commodity and food prices have fallen below their pre-war levels, the statement said, adding that the moderating effect on pricing arising from the fall in domestic demand and, from the spring months, the fading of base effects would support the decline in inflation.
The Council said it expects a gradual decrease in inflation in the first half of the year before a more significant decrease from the middle of the year. CPI will return to the central bank tolerance band in 2024, it added. GDP growth is also expected to pick up in the middle of the year, the Council said.
NBH Deputy Governor Barnabás Virág told a press conference that a change to the 13 percent base rate was not on the agenda. He said that although disinflationary effects were strengthening, falling domestic demand was acting as a “disciplining force”. Prices are expected to remain at peak levels for months, which will be followed by a slow decline in inflation, before accelerating in the second half of the year, he said.
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Source: napi.hu, MTI