Reuters logo
UPDATE 1-Hungarian rate cut cycle "finished", central banker says
May 26, 2016 / 8:27 AM / a year ago

UPDATE 1-Hungarian rate cut cycle "finished", central banker says

* Dep gov: Aims to keep rate at 0.9 pct as long as possible

* Sees no need for any further loosening measures for now

* Any further moves would be “fine-tuning” of existing tools

* Expects 2016 GDP growth to come in around 3 pct (Adds detail, more comments)

By Gergely Szakacs and Krisztina Than

BUDAPEST, May 26 (Reuters) - Hungary’s central bank has finished cutting interest rates and wants to keep the base rate at its current 0.9 percent level “as long as possible,” National Bank of Hungary Deputy Governor Marton Nagy said on Thursday.

The central bank, run by a close ally of Prime Minister Viktor Orban, cut its base rate by 15 basis points in a last move to 0.9 percent on Tuesday, saying current rate levels would support the economy and ensure it meets its inflation goal.

It has reduced the benchmark, now the second-lowest in the region behind the safe-haven Czech Republic, in 15 basis-point steps since March to bolster the economy and revive inflation, which it projects to remain below its policy target for years.

Nagy said with the rate-cutting cycle finished, the bank was now comfortable with current monetary conditions and there was no need for any policy measures for now.

“If we were to make a move -- which is not the case now -- then it is likely that it would be unconventional tools in the name of fine-tuning,” Nagy told reporters.

He said although the central bank was pulling out from its interest rate swap tenders, which helped boost banks’ demand for Hungarian government debt, the bank could modify other existing unconventional monetary policy tools if the need arises.

But Nagy said the bank planned no new unconventional monetary policy instruments beyond those already in place.

The bank still expects economic growth to come in at about 3 percent this year despite first-quarter figures coming in well below expectations due to a fall in investments and lower output by the car sector, a key driver of growth.

Central bank director Barnabas Virag said an expected upswing in the housing market, stronger European Union investment inflows and higher lending by commercial banks would boost the economy in the second half after “moderate” growth in the second quarter.

He also said wage growth dynamics were stronger than expected, which could also lift domestic consumption.

Nagy said the central bank had no exchange rate target but welcomed the stability of the forint exchange rate, adding that its volatility was low in historical terms. (Reporting by Krisztina Than and Gergely Szakacs; Editing by Toby Chopra)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below