The rate setting Monetary Council of The National Bank of Hungary (MNB) decided to leave the central bank’s key rate unchanged at 2.1% at a meeting on Tuesday, as expected. After a rate-setting meeting in July, the Council said it had wound up an easing cycle started two years earlier. The base rate could remain unchanged for a longer period, the Council said in a statement issued after the meeting.
The Council said it expects economic growth to continue even if external demand weakens, and attributed the August decline of industrial production and foreign trade partly to one-off effects. Household consumption is likely to grow gradually, mainly as disposable income is expected to increase in real terms and the needfor deleveraging reduces.
Some analysts polled by MTI said they saw a growing chance for the central bank to restart rate reductions, though not before the beginning of next year. Worsening business confidence in Europe has a negative effect on the prospects of the Hungarian manufacturing industry, and this could prompt the central bank to prop up domestic economic activity through renewed rate cuts, Ákos Kuti of Equilor Befektetési said.
The latest macroeconomic data and market processes point to lower growth and lower inflation which makes the restart of NBH rate cuts possible, Dániel Bebesy, portfolio manager of Budapest Alapkezelő, said. Tamás Pesuth, leading analyst at Nézőpont research institute, disagreed, however, saying that the low inflationary environment still characterising the Hungarian economy supports keeping the rates on hold.
via hungarymatters.hu photo: MNB building (budapest-foto.hu)