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Central Bank To Keep Interest Rate on 2.1%

admin 2014.10.16.

The National Bank of Hungary (MNB) is seeking to keep its benchmark interest rate at a record-low 2.1 percent “as long as we can,” Gyula Pleschinger, one of nine members on the Monetary Council, said in an interview at the Bloomberg office in Budapest yesterday. “The next move will probably be up, not down,” said Pleschinger, who was in a minority on the rate panel that sought a slower and shorter rate-cut cycle. “But it is not an issue in the foreseeable future”, he added.

It means that Hungary’s central bank, which ended Europe’s longest uninterrupted easing cycle in August, won’t cut its main rate further even as consumer prices decline. Hungary will need “loose” monetary conditions for an “extended” period to meet policy makers’ 3 percent inflation target in the medium-term. In line with the unprecedented easing cycle Hungary’s economy has continued to recover after it had suffered two recessions in the past five years. Hungarian economy now growing 3.9 percent in the second quarter from a year earlier, which is the fastest currently in the European Union. The government forecasts 3.1 percent growth this year.

Bloomberg has also reported that the Hungarian government might refrain from tapping the international bond market this year as the government seeks to reduce the country’s foreign-currency debt. The gross government debt stood at 85 percent of GDP at the end of June, according to central bank data. The government predicts the debt level will fall to 76.9 percent of gross domestic product by the year-end from 77.3 percent at end-2013.

via bloomberg.com photo: MNB (budapest-foto.hu)

 


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